The Commodities Feed: Risk of additional Russia tariffs unnerves market

ICE Brent rallied by more than 2.3% yesterday, pushing prices back above US$70/bbl. This was in response to President Trump saying he would shorten the deadline for Russia to come to a deal to end the war with Ukraine from 50 days to 10-12 days. No deal could see Russia facing tougher US sanctions, along with the US imposing secondary tariffs of 100% on trading partners that import Russian oil. If imposed and enforced strictly, it would cause a significant shift in the oil outlook. India, China and Turkey have increased purchases of Russian crude since the Russia-Ukraine war, taking advantage of the discounts for the oil.

However, these countries will need to weigh the benefits of importing discounted crude oil against prohibitively high tariffs on their exports to the US. For China, crude oil imports from Russia have averaged 1.99m b/d so far this year, or 17.5% of total crude imports. In 2024, 14.7% of total Chinese exports went to the US, making it the largest destination for Chinese shipments. This share has fallen to 11.9% so far this year, given the tariff environment. Meanwhile, India, which has imported around 1.75m b/d of Russian crude oil so far this year (35% of total crude imports), saw 20% of its total exports go to the US in FY24-25. Given the large share of exports to the US, secondary tariffs would likely see these two large buyers of Russian oil try to put a stop to these flows.

Another key question is whether Trump would go ahead with these sanctions and secondary tariffs. It’s no secret that Trump is keen to see lower oil prices. Such an action would push prices significantly higher, erasing the expected surplus in the market through 2026. Russia exports more than 7m b/d of crude oil and refined products. Then there’s the potential disruption to broader trade if prohibitively high tariffs are imposed. It’s for these reasons that we don’t believe these secondary tariffs will come into effect, at least not at the 100% level.

Copper prices on Comex slumped after Chile’s finance minister said the country will push for an exemption for a planned US tariff on the metal. Trade talks between the US and Chile started in Washington on Monday.

The US imports about half of its copper needs. Chile is the largest import source, at around 40%. In theory, Chile could fully meet the United States' demand for refined copper.

The copper market is awaiting more details on planned copper tariffs, which are set to begin on 1 August.

Traders have been shipping record volumes of copper to the US to front-run the the tariffs. This has caused a record price gap between US copper prices and the benchmark LME prices. Copper in the US is up around 40% so far this year, but they don’t yet reflect a 50% tariff. The premium now stands at around 25%. The tariff should be positive for Comex copper. Prices are likely to rise to reflect the 50% levy once the current inventory overhang is depleted.

CBOT corn and soybean prices fell yesterday in anticipation of rising exports from Argentina after the government decided to cut tariffs on these crops. Over the weekend, Argentina’s president announced a reduction in agricultural tariffs to support farmers and promote free trade. Soybean tariffs will drop from 33% to 26%, while corn tariffs will be reduced from 12% to 9.5%. Crop prospects are also looking good in a number of key growing regions. Also, a stronger USD yesterday added further pressure to prices.

The USDA’s latest crop progress report shows that 73% of the US corn crop is in good to excellent condition as of 27 July. This is lower than 74% a week ago, but up from 68% seen at the same stage last year. In contrast, the agency rated 70% of the soybean crop as good to excellent, higher than 68% a week ago and 67% at the same stage last year. Finally, 80% of the winter wheat crop is harvested, slightly down from 81% harvested at this stage last year and a five-year average of 81%.