A bill that would revoke Russia’s “most-favored-nation” trade status has passed the House by a vote of 424 to eight, and is expected to pass the Senate soon. It would revoke the status Russia currently has as an ally in the global trading system, which would send a devastating financial blow to Russian President Vladimir Putin.
The measure is symbolic and aims to put pressure on the Russian economy by banning Russian oil, gas, coal, and alcohol imports. While that ban only affected 2% of the U.S. market, it sends a clear message that the U.S. will not be a friend in the global trading system. But will it make the situation worse?
The legislation would require the U.S. Trade Representative to increase tariffs on Russian imports. The House passed the legislation earlier this year. But Republicans in the Senate are worried that the language in the bill may not be as strong. The Magnitsky Act allows for sanctions based on human rights violations. The legislation would also require congressional approval, which requires a veto by President Barack Obama.
The revocation of Russia’s “most favored nation” trade status would have limited effects on the U.S. economy. Because Russian imports are mainly natural resources, the tariffs imposed on them are relatively low. Hence, buyers of Russian goods would be subject to tariff rates set under the Smoot-Hawley Tariff Act of 1930. This act disrupted trade during the Great Depression. It was a result of the Smoot-Hawley tariff act of 1930, which imposed a higher import tax on diamonds, aluminum, and plywood.
As a result of this, the Senate will now consider the bill to revoke Russia’s trade status. The Senate had already passed the bill requiring Russia to resume normal trade relations. The House, meanwhile, passed the bill on a 420-3 vote. It will also ban the import of Russian oil and other energy products from the United States.
With all of the pressure from US sanctions, Russia’s economy is already feeling the pain. Experts predict that Russia’s GDP will contract by 15% this year, while inflation is already well into double figures. With 600 private sector companies already leaving the market, the sanctions will further isolate Russia from the global economy. But the US is not the only country feeling the pain of this decision.
After the House and Senate voted to ban Russian oil exports, the Trump administration is likely to take further action against the Russian government. President Joe Biden wants to tighten the US trade squeeze by restricting imports from Russia and banning Russia’s oil. However, if Biden’s proposal becomes law, it could mean higher tariffs on Russian goods.