Russia and Ukraine have been wrapped up in an ongoing conflict for years, and the U.S. government is taking action to find a diplomatic solution and peace. President Trump recently warned that 100% “secondary tariffs” will be imposed on Russia if a peace agreement can’t be arranged in the next 50 days.
A tariff of this nature would affect Russia and any country trading with the nation, such as China, India, Brazil, and Turkey.
What Are Secondary Tariffs?
Regular tariffs, which are most discussed, target third-party traders. This means that nations that import Russian items would face severe repercussions from America, namely a 100% tariff on any exports to the U.S.
This way of making Russia’s trading partners accountable will put substantial pressure on multiple nations.
Sanctions
After Russia’s aggressive invasion of Ukraine three years ago, the U.S. and other countries have been gradually extending sanctions on the country. Sanctions are designed to pressure the country and restrict residents from banking, important trade in industries, and luxury goods.
However, the sanctions have not been the nail in the coffin because Russia is looking to trade with other countries, such as China and India, which continue to buy the nation’s oil and gas at a discount.
An Ultimatum
Recently, President Trump has set a deadline for Russia. He wants the nation to agree to a peace treaty with Ukraine in the next 50 days, or these secondary tariffs will hit the country hard.
The warning has been supported by more just words, with the administration putting diplomatic weight behind it. Reuters reported that the policy is a huge shift from the previous rhetoric, as it now has a timeline for Russia to meet.
Why Not Use Primary Tariffs?
Targeting Russian exports directly would not impose as much strain on Russia as secondary tariffs. U.S. imports from Russia were already very low after previous bans.
Before the invasion of Ukraine, Russian exports into the U.S. were valued at $23 billion, compared to the $2.5 to $3 billion that they are now. Raising tariffs on Russia directly won’t have the same impact as targeting trade allies.
The Importance Of Oil
Russia has been surviving through sanctions primarily due to its oil trade. The country exports its oil to countries like China, Brazil, and India, which buy millions of barrels daily.
The U.S. knows that this crucial economic trade needs to be its next target, and secondary tariffs could force these trade partners into buying less oil from Russia.
The Impact On The U.S.
While the secondary tariffs would put substantial strain on Russia’s trade partners, they would also surprise the U.S.
These tariffs will also affect businesses and consumers that import goods from Russia, highlighting the policy’s drawbacks if it goes through.
Skepticism
Despite the warning that has been announced, many are skeptical of whether it will be backed up and go through.
According to Reuters, the secondary tariffs could impose higher global inflation and higher gas prices, which could force the White House to back down or change the 100% figure to a lower number – this is what Russia’s trade partners are counting on.
Global Complications
It is complex to navigate 100% secondary tariffs for trade partners. Countries like China and India need Russian oil for energy and often buy it at lower prices.
Secondary tariffs would require these countries to either pay more for energy or risk losing access to the American market. Economic retaliation could emerge, with China imposing tariffs on U.S. sectors that depend on Chinese imports.
Building Pressure
The main reason Trump imposed the warning is to build pressure in the hope that Russia will open the floor for peaceful negotiations.
Another reason is that America is gaining leverage over major energy economies. However, this strategy is not without its risks, and a mass backlash could occur if oil prices skyrocket.
What’s At Stake
If the Trump administration follows through with 100% secondary tariffs, there could be multiple consequences, including global energy costs going up, supply chains being hampered, and world markets seeing negative effects.
This could bleed into the lives of U.S. consumers, who could face higher prices. CNBC reports that these secondary tariffs would rattle numerous economies all at once.
The Road Ahead
The road ahead is uncertain, as Trump’s threat had diplomatic backing and a definitive deadline that Russia had to meet. According to Reuters, there is plenty of skepticism about whether the U.S. government would risk a global recession to try to end the war in Ukraine.
The world is watching, and no one knows for certain whether Russia will double down or if the threatened tariffs will become a reality.