Will Donald Trump’s 25% tariff threat to Venezuelan oil companies beat India’s energy imports? How will it hit the Indian economy?

Prime Minister Narendra Modi and U.S. President Donald Trump

Hours before the senior delegation on a four-day visit to India left the country’s assistant trade representative, Brendan Lynch, a U.S. Assistant Trade Representative for South and Central Asia, left the country’s assistant trade representative, President Donald Trump announced an additional 25% tariff on the countries that purchased crude oil from Venezuela. In addition to other tariffs imposed earlier, this tariff will be imposed on all imports.

This is a major blow to India, which has been buying crude oil from Latin America. India stopped buying oil from Venezuela to isolate left-wing President Nicholas Maduro after the U.S. imposed economic sanctions on Caracas in 2019.

India buys crude oil from Venezuela

New Delhi resumed oil imports from the country in 2023 after Washington waved sanctions. After a brief calm, sanctions are back, but India continues to buy crude oil from Venezuela, mainly because of the lower prices.

Venezuelan crude oil has a tiny share of the total crude oil imported by India. Although New Delhi imports 4.5 million barrels per day (one barrel equals about 159 liters), it purchased 65,000 bpd in January and 93,000 bpd from Venezuela in February.

It can be compared with 16 million tons of crude oil imported from South American countries in 2019 before India imposes U.S. sanctions.

How will U.S. tariffs on Venezuelan crude hit India?

However, according to data from the oil company’s Petroleum Department Planning and Analysis Cells (PPAC) (PPAC), the U.S.’s new tariff threat to the U.S. is very important, and its dependence on imported oil will increase from 87.7% in fiscal 2024 to 88.2% in February 2025.

Secondly, the additional tariffs on Venezuelan oil will certainly change crude oil prices in the international market.

While WTI crude oil traded at about $69.13, while Brent crude oil was about $73.02 a barrel at the time of writing, they are certainly going to soar. This will affect all oil entering elephant countries, including India.

According to PPAC, India’s economy could hit hard, with consumption of oil products most likely to grow 4.7% in fiscal 2025-26. India may end up buying 252.93 million tons of crude oil this year, paying huge sums.

Will it impress us with investment?

Brendan Lynch’s visit is also important, as negotiations are not limited to tariffs, but will also be held on potential U.S. investment issues.

Until 2023, the cumulative investment exceeded US$60 billion, and the United States is the largest source of foreign direct investment (FDI).

Analysts believe U.S. companies may be interested in making large-scale investments in areas such as technology, e-commerce, renewable energy and healthcare in India.

Since the U.S.-China trade war will certainly begin soon, U.S. companies may take advantage of the opportunity to expand their operations in India.

Negotiations will also be held before the formal start of comprehensive negotiations on the Bilateral Trade Agreement (BTA). In fact, negotiations to which tariffs will be conducted may set a template for future negotiations.

What does Donald Trump say?

However, the U.S. president chose to warn India rather than lend a helping hand. Donald Trump wrote in a truth social post: “Venezuela is very hostile to the United States and the freedom we advocate. Therefore, any country that buys oil and/or gas from Venezuela will require a 25% tariff on any trade the United States does with us.

This is also the date when India’s reciprocity tariffs come into effect.

Trump is also frustrated because developing countries like India have trade surpluses with the world’s largest economies.

In the fiscal year 2024-25, bilateral trade reached US$129.2 billion, India exported US$87.4 billion worth of goods, while imports from the United States reached US$41.8 billion. Its trade surplus is $45.7 billion.