US Suspends Most-Favored Nation Status For Russia. This Is What It Means

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Clarification on new US import tariffs for Russian goods

The US President, Joe Biden, has signed into law a US Congress bill requested that normal trade relations, also known as ‘most favored nation’ status with Russia be suspended. That effectively means that previous, lower WTO level tariff reductions will no longer apply to Russian exports entering the US market.

Biden had previously taken executive action to ban US imports of Russian oil, liquefied natural gas and coal, as well as Russian seafood, alcohol, (mainly vodka) and diamonds (Russia is the world’s largest producer).

These new measures open the way for the US to impose higher tariffs on various imports, such as certain steel and aluminum products, amongst all other traded items.

However, the impact is likely to be small. US-Russia trade has been relatively small anyway, while sanctions have already done away with about 60% of the current US$30 billion worth of imports the United States bought from Russia in 2021, roughly equivalent in value terms to the imports the US obtained from tiny Singapore.

But the new import bans against alcohol, seafood and diamonds add up to only about US$1 billion in sales, according to the White House. Russia provided less than 1% of all US vodka imports in December, according to the Distilled Spirits Council of the United States, and less than 2% of US seafood imports by volume, according to US customs statistics.

In terms of other new tariffs, again there will be minimal actual impact, as the US buys mostly natural resources from Russia for which existing tariffs are mostly low or zero — oil and metals such as palladium, rhodium, uranium, and silver bullion. This means there will be little or no increase in tariffs because of the loss of MFN status.

To replace the MFN tariff rates, US buyers of Russian goods would pay import taxes established under a 1930 US law and would still be zero for metals. But tariffs would rise considerably for semi-worked or worked products, meaning imports of unwrought aluminum, plywood, and semi-finished steel, among other value-added products would rise significantly.

Readers may contact us for clarification on new, non-MFN tariff import rates into the US from Russia. The bulk of these can be expected to impact on small US businesses with Russian sourcing connections.

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