The decision of US President Donald Trump to apply a 10% tariff on imports from all countries may increase tension in global trade and create volatility in the markets. If global economic growth weakens, oil prices may fall, which would affect Azerbaijan’s budget revenues. In the short term, the strengthening of the dollar could indirectly exert pressure on the manat exchange rate.
How would a possible decline in oil prices affect Azerbaijan’s budget? Which sectors in Azerbaijan should be protected by additional import tariffs? What products currently have import tariffs in our country and how much are they? For which products would it be good to apply import tariffs in order to stimulate domestic production?
Regarding this topic, economist-expert Natiq Jafarli told Medianews.az that Donald Trump’s imposition of 10% tariffs can actually be seen as more positive compared to previous periods.
According to him, tariffs for some countries were previously higher, and the current decision may be accompanied by reductions in several directions:
"Factors affecting oil prices are not limited to tariff policy alone. The weakening of the dollar relative to world currencies is also an important factor, and this is part of the carefully considered policy implemented by the Trump administration to stimulate exports. Lowering the dollar index serves to increase the competitiveness of US products in foreign markets.
Currently, oil prices remain high mainly due to geopolitical tensions. Events around Iran, the continuation of the Russia-Ukraine war, etc. Therefore, prices are still around 70 dollars, which is quite high. But in any case, as geopolitical tensions lessen over the course of this year, prices will fall as well. This also has negative effects on Azerbaijan. Nearly 90% of our exports are oil, oil products, and natural gas. As prices fall, the volume of foreign currency entering the country also decreases.”
According to the expert, domestic production in Azerbaijan is not yet strong enough to be protected by high tariffs:
"Currently, import tariffs in the country are applied at three levels – 0, 5, and 15 percent, and the majority of imported products enter the country with a 15% tariff. This rate is even higher than the 10% tariff imposed by the US.
The tax and tariff burden for some products is quite high. For example, the value-added tax on pharmaceutical products is 18%. Tariffs on cars and spare parts are also high. With weak domestic production, increasing import tariffs may lead more to higher prices and inflation, which would negatively affect the social situation of citizens.”
N. Jafarli emphasized in conclusion that the main priority should not be increasing tariffs, but rather expanding production sectors and strengthening local production in the country. Only after that would it be appropriate to take additional steps to protect the domestic market.
Oguz Ayvaz