Trade truce gets a price list, oil stays above $100, and the rupee holds its breath

Publishing a tariff-cut list is the moment a trade negotiation shifts from signalling to specifics. A tariff is a tax one country charges on goods arriving from another, and cutting it lowers the price importers pay, which feeds through to cheaper goods for consumers and lower input costs for firms that use those goods in production. The $60bn figure is the value of trade that would become cheaper if the recommended cuts go through. That is not a trivial number: total US-China goods trade ran at roughly $580bn last year, so this list touches about a tenth of it.

The harder question is whether a list becomes law. The precedent that fits here is the US-China Phase One deal of January 2020, which also began with a detailed list of Chinese purchase commitments. Many of those commitments were never met, partly because the pandemic disrupted trade flows and partly because enforcement was weak. The difference this time is that both sides have agreed to two more summits this year, which creates a political deadline. If Xi and Trump are meeting again in November, neither side wants to arrive empty-handed. That deadline is probably the strongest enforcement mechanism on the table right now, and it is worth more than any written clause.

The Strait of Hormuz is a chokepoint, a narrow passage that a large share of global oil supply must pass through, and chokepoints give whoever controls them enormous power over prices. When the strait is disrupted, the effective supply of oil to world markets falls even if the oil itself still exists underground. A fall in supply, with demand unchanged, pushes the price up. That is the mechanism running here, and it is why Brent is still above $100 despite some diplomatic movement on the Iran file. Traders are not pricing today's supply; they are pricing the risk that the disruption continues.

What I find genuinely hard to call is how long this can persist before demand destruction kicks in. Demand destruction is when prices rise so high that buyers cut back, which eventually pulls the price back down. In 2022, European gas prices spiked so sharply after Russia's invasion of Ukraine that industrial users shut down production and households rationed heating, and demand fell enough to ease the crisis by winter 2023. The parallel is imperfect because oil is harder to substitute quickly than gas, and the Hormuz disruption affects a wider set of buyers. But if Brent stays above $100 for another quarter, the slowdown in oil-importing economies will itself reduce demand, and that is the self-correcting mechanism the market is eventually relying on.

The actor whose decisions matter most right now is the RBI's monetary policy committee, and its dilemma is a near-perfect illustration of what economists call the impossible trinity: a central bank cannot simultaneously control its exchange rate, set its own interest rates freely, and allow capital to move in and out of the country without restriction. India allows fairly free capital movement, so when global yields rise, money flows out toward higher returns abroad, and the rupee falls. The RBI can fight that by raising its own rates, but higher rates slow domestic borrowing and investment, which is the last thing a government wants when growth is already under pressure from an expensive energy import bill.

The numbers make the bind concrete. Every one-rupee fall against the dollar raises India's annual oil import bill by roughly $2 to $3bn, depending on volumes. The rupee has moved from around 84 at the start of 2025 to nearly 96 today, a fall of about 14%. That cumulative move has added tens of billions of dollars to the import bill over the period, money that has to be found in foreign exchange reserves or financed by borrowing abroad. The RBI's reserve spending buys time, but the underlying pressure only eases if oil falls, global yields fall, or the rupee is allowed to weaken further. Right now, none of those three exits looks easy.