WASHINGTON (AP) — President Joe Biden announced Friday the U.S. will dramatically downgrade its trade status with Russia as punishment for its invasion of Ukraine and also ban imports of Russian seafood, alcohol and diamonds.
The broad trade shift, which revokes the “most favored nation” status for Russia, is being taken in coordination with the European Union and Group of Seven countries.
“The free world is coming together to confront Putin,” Biden said from the Roosevelt Room of the White House.
Russia being stripped of its most-favored nation status would enable the U.S., along with allies, to increase tariffs on Russian imports. This could lead to increased isolation for the Russian economy.
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Biden’s changes on Russia’s trade status come as bipartisan pressure has been building in Washington to revoke what is formally known as “permanent normal trade relations” with Russia. In remarks made to Congress this weekend, Volodymyr Zelenskyy, the Ukrainian president demanded that the United States and its allies take action against Russia. The move comes days after Biden announced that it would ban Russian imports of petroleum products.
This week’s moves are the latest for the sanctions that have crippled the Russian economy and a sign that the U.S. and its allies will continue to use their financial heft to retaliate against Russian President Vladimir Putin. Others include the freeze of assets at central banks, restrictions on exports and penalties against Russian oligarchs. These financial tools have led to the Russian ruble losing 76% of its value against the U.S. dollar over the past month, which has caused destructive inflation that could erode Putin’s ability to wage a prolonged war in Ukraine.
Biden, after initially slow-walking congressional attempts to take the trade action against Russia, was embracing lawmakers’ efforts to do just that on Friday.
About 60% of U.S. imports were cut by earlier sanctions against imports of Russian oil and gas.
Since the beginning of global trade, most countries have been given preferential treatment by being designated as “most favored nations”. Because they are developing economies, some countries within the WTO enjoy special privileges. Russia, which does not have MFN status from America, would be joining the ranks of North Korea and Cuba.
This revocation has symbolic significance. Russian imports into America are mostly natural resources and would face no rise in tariffs due to losing their status. This was stated by Ed Gresser from the Progressive Policy Institute in Washington in an online posting.
Russian importers would not pay the current tariff rate. Instead, they would have to pay the rates set by the Smoot-Hawley Tariff Act of 1929, which prevented trade from being disrupted during the Great Depression. The import tax would remain at zero for uranium and palladium as well as silver bullion, king crabs, and rhodium. The import tax will rise for semi-finished and unwrought steel, prefabricated aluminum, plywood, diamonds, and other items.
On Monday, Democrats on the powerful House Ways & Means Committee posted, then removed, an announcement on a bipartisan bill to ban Russian oil imports and slap further trade sanctions on the country, according to an aide, because of pushback from the White House against acting before Biden had coordinated with allies and reached a decision on both matters. After Biden had instituted the ban via executive order, the House approved Wednesday a smaller bill that would ban Russian oil imports.
Last week, Canada became the U.S.’s first significant ally and removed Russia from its most-favored nation status.
Biden’s action was first reported by Bloomberg News.
