Senator Lindsey Graham, a Republican, claims that US President Donald Trump has supported the Russia sanctions measure, which could impose tariffs of up to 500% on nations purchasing Russian oil. Potential effects on gold, silver, and the Indian stock market are discussed by analysts.
US President Donald Trump has supported the Russia sanctions measure, which could increase US taxes on nations that purchase Russian oil to at least 500%, according to Republican Senator Lindsey Graham.
On January 7, Graham claimed that President Trump had "greenlit the bipartisan Russia sanctions bill, which will allow him to punish those countries who buy cheap Russian oil, fueling Putin’s war machine."
"With the help of this measure, President Trump would have a great deal of power to persuade nations like China, India, and Brazil to cease purchasing the cheap Russian oil that finances Putin's massacre against Ukraine. "I anticipate a robust bipartisan vote, ideally as early as next week," Graham said.
What is the 2025 Sanctioning of Russia Act?
According to the US Congress's official website, the legislation aims to "impose penalties on certain persons (individuals and entities) if the President determines that the Russian government or a person acting at Russia's direction is involved with (1) refusing to negotiate a peace agreement with Ukraine; (2) violating a negotiated peace agreement; (3) initiating another invasion of Ukraine; or (4) overthrowing, dismantling, or seeking to . subvert the Ukrainian government"
The measure mandates specific actions, such as penalties that prohibit visas and property and raise tariffs to at least 500%, if the President makes such a finding.
What possible effects would the Russia sanctions law have on the Indian stock market?
India has been accused by Trump of purchasing Russian oil. He has put a 50% tax on Indian products and threatens to raise them further if India keeps purchasing Russian oil.
The Indian economy and stock market confidence may suffer significantly if tariffs are raised even further and extended to the services sector.
But since the US Supreme Court is scheduled to rule on tariffs on Friday, it is too soon to draw any conclusions.
"Let's await further clarification. The Supreme Court's decision on tariffs tomorrow will be significant. That might have an impact on how these actions are ultimately carried out, according to VK Vijayakumar, Chief Investment Strategist at Geojit Investments.
However, Vijayakumar emphasized that the 500% tariffs will have a significant negative impact on the markets and economy, pointing out that even with the present 50% tariffs, the economy will find it challenging to maintain its current economic speed. Despite tariffs, India has performed fairly well thus far, but protracted uncertainty is a worry.
"At the moment, India and the US have a $41 billion trade surplus. The rupee, which was already the worst-performing currency in Asia last year, might be under pressure if the tariff problem is not resolved. Expectations of further devaluation may lead to more selling by foreign institutional investors (FII). Currency weakness causes FII outflows, which further devalue the currency, creating a self-fulfilling vicious cycle, according to Vijayakumar.
Is there a larger macroeconomic risk associated with the possibility of higher tariffs?
Indeed, Vijayakumar replied.
"Even a 500% tariff would be feasible because the US President has demonstrated his ability to make erratic and disruptive judgments. There may be pressure on macroeconomic stability. If more tariffs on India are announced by the US
The Russian sanctions bill is a significant drawback, according to G Chokkalingam, founder and head of research at Equinomics Research Private Limited.
"There's no denying that it is obviously bad. A 500% tariff is noteworthy. But not every product is impacted equally, and many exports are not immediately competitive, according to Chokkalingam.
Chokkalingam noted that because India exports a significant portion of non-tariff goods and gains from free trade agreements (FTAs) and diversification into other categories, the impact has been manageable thus far.
According to Chokkalingam, as long as the impact is restricted to products, the situation can be handled and it is not currently a major crisis for India. However, it would become a serious issue if such restrictions were to impact the services industry.
ICICI Securities' head of research, Pankaj Pandey, views these advancements differently. He claims that India is not obligated to purchase Russian oil and that it would be a huge benefit if Venezuelan oil was given at a lower price.
"I think new customers are necessary for Venezuelan oil to rebound. In that situation, India might receive an offer to purchase inexpensive oil from Venezuela. Indeed, I see a glimmer of optimism for tariff reductions.
The possible effects on gold and silver of the Russian sanctions bill
Economic and geopolitical unpredictability are major factors influencing the price of gold and silver. Precious metals may see new purchasing interest if tariffs on China and India are raised and the tariff war intensifies, pushing prices to previously unheard-of heights.
According to Jigar Trivedi, Senior Research Analyst at Reliance Securities, this would undoubtedly affect bullion, and if the rupee keeps falling below 91 levels, the undertone will continue to be optimistic.
"The role of the RBI will be crucial as sufficient ammunition is there with them to intervene in the forex market, but time will only tell the trend in the rupee and gold," Trivedi stated.
Steep tariffs will definitely enhance global uncertainty, which is normally good for bullion, according to Anuj Gupta, an analyst registered with SEBI.
"These policies may increase inflation, which would be detrimental to the US economy. A variety of goods and commodities are imported by the US from nations including China, Russia, and India. Costs could rise as a result of higher tariffs, which would cause inflation. Gold and silver will benefit in the long run from this inflationary pressure, according to Gupta.
Gupta claims that a solid support area for gold is between $4,300 and $4,400. ₹1,20,000 to ₹1,30,000 is a crucial support area in the local market. $4,500, or around ₹1,42,000 domestically, is a significant barrier on the higher side. There is more resistance around $4,700, or about ₹1,50,000 in the domestic market.
0 Comments