Trump's Tariff And Russia

Memri

21-04-2025

Trump's "tariff revolution" will probably become the single most important global economic event of 2025, whatever all the others may be. No one expected the size of the "tsunami" following the "earthquake" in Washington on April 2. [1] Even while it seems now that an economic "world war" was avoided, as the entire battle appears to be that predominantly between the United States and China, the future of the world as we know it has become at least a little uncertain.
When President Donald Trump announced his "reciprocal" tariffs soon after imposing some less radical ones on Mexico and Canada, [2] the markets took its greatest tumble since the 2020 pandemic. [3] In Moscow, many experts, officials, and politicians decided it was an extremely disturbing move, [4] even though Russia itself was exempted from any of the new tariffs. First, the White House attributed such an exclusion to the fact Russia has been massively sanctioned, and the trade with it is "negligible," [5] but later stated that it does not want to "provoke" the Kremlin and derail the ongoing talks on armistice in Ukraine. [6]
Whatever the U.S.'s reasoning might be, the effect on Russia of the tariffs is expected to appear serious – first of all, because tariffs are distinctively different from the sanctions to which Moscow had already been accustomed. While sanctions can be either avoided or circumvented, there are no means of discarding the market forces acting on the global scale and adjusting to a new protectionist environment. Moreover, almost immediately, a consensus emerged that it was unlikely that the global economy could avoid a serious slowdown, if not a recession, that might undermine the appetite for commodities and lower the price for almost all Russian export products – from crude oil to timber, from metals to fertilizers. Therefore, it was not a coincidence that skeptical scenarios prevailed in all the forecasts that appeared immediately after Trump's declaration.
(Source: Mk.ru)
The Bank Of Russia Possesses One Of The Largest Gold Reserves In The World
The influence of low oil prices on the Russian economy is well-known. The Bank of Russia has been fearing them for a long time, and even reminded decision-makers about the nearly two "poor decades" starting from the mid-1980s that followed the times of "oil affluence." [7] Potential losses were thought to be significant because Russia's dependence on oil actually looks much higher than the government tries to depict. Officially, the so-called "oil-and-gas revenues" constitute 27.1 percent of federal revenues for 2025, [8] but here only "direct" inputs are counted (the taxes on extraction of natural resources – НДПИ – and export duties for crude and processed oil and gas ) . [9] In fact the revenues associated with the energy sector are much higher: On the one hand, they are represented by the profits of oil and gas majors taxed by federal and regional authorities and by excise taxes on gasoline and other types of fuel sold on the domestic market (both types of revenue may be estimated at around RUB 1.4 trillion per year); on t he other hand, there are millions of workers employed by both the energy sector and its subsidiaries and suppliers whose paychecks result in significant income taxes going to local budgets.
Some analysts estimate the overall oil-and-gas-related revenue at around 50 percent of what is collected by Russia's tax system, so problems that arise from the drop in the oil price may be bigger than previously expected. Russia's federal budget for 2025 was elaborated under the condition that the Urals oil is valued at $69.7 per barrel , [10] while on April 9, its price fell below $50 per barrel because both of overall decline and the rise of discounts caused by continuous pressure from U.S. authorities on its buyers. [11] The Finance Ministry responded by announcing that it was no longer buying hard currency into its reserve funds and had started to sell reserves to fund the current expenses, [12] with estimates of full-year deficit rising to RUB four to six trillion compared with previous estimates of RUB 500 billion. If one takes Russia's daily oil exports as 5.8 million barrels, the daily decline of export revenue may be estimated at $90-110 million compared to Q1 2024 average numbers. [13]
Nevertheless, as it appeared by mid-April, the decline of oil prices is not in freefall as the prices rebounded by around 6-8 percent as markets had levelled out – and I would argue that the oil price problem remains a modest one for the Russian government in 2025. The federal budget deficit, which expanded to RUB 3.84 trillion in January and February, [14] declined to RUB 2.17 trillion in Q1, [15] and prices for the Urals blend are now hovering around $60 per barrel, preventing the depletion of the reserves. Moreover, President Trump's experiments with tariffs have produced some other effects, which many experts tend not to see. For example, the rolling gold price that had increased by 22 percent since Trump's reelection [16] contributed heavily to improving Russian finances, as the Bank of Russia possesses one of the largest gold reserves in the world. [17] The appreciation of these reserves caused a $40 billion upward revaluation of Russia's reserves that easily offsets all the damage caused by the current decrease of oil prices. [18] Of course, no one can now predict how low the oil prices may go if the economic quarrels between the U.S. and China accelerate, but as for now it seems the Russian economy can cope with challenges for at least around one year, and the oil prices themselves will not undermine it in the short run.
Moreover, there is another important consequence of the current trade war – the depreciation of the U.S. dollar on international markets. Since President Trump's inauguration, it had lost around 10 percent to the euro and many other major international currencies. [19] Such a trend contributes to the strengthening of the ruble, which might have otherwise stopped at RUB 85-90 per dollar and reversed, bringing it closer to 100 per dollar. But the dollar's weakness is now taken into account by the Russian traders and the ruble has stuck at around Rub 82-84 per dollar , [20] even while the optimism concerning the perspectives of armistice in Ukraine are fading. The "overvaluation" of the ruble is often considered a source of problems for Russia's federal budget , [21] as it pushes down the custom revenues as well as others linked to the ruble exchange rate (the most common estimates suggest that every one percent revaluation cost the budget between RUB 150 and 175 billion) – yet, it also prevents price hikes, which I believe are today much more important for many Russians.
The start of 2025 was marked by new inflation highs, [22] and so it seems the stability of the ruble contributes to combatting inflation. On the one hand, the import prices stabilize or decrease, and, on the other hand, high yields on deposits in rubles produce enormous revenues in dollar terms. Hence, many Russians would rather add money to their bank accounts than spend it, which also pushes the prices down. I would expect that if the exchange rate remains stable until at least early June, the Russian central bank will start to lower its key rate, which might become a crucial turning point for the Russian economy.
War In Ukraine Seemingly Becomes Less Important To Western Powers
Another trend – important, but still not developed – might be some price cuts for many Russia-bound imports, particularly those coming from China. New tariffs had already disrupted Chinese exports to the United States: many sources report on the stalled ports and cancelled orders that may reach billions of dollars. [23] It will take some time to realize how serious the decline of Chinese exports to the U.S. might be (I would forecast their decline in April to reach 35 to 40 percent compared to April 2024). However, the Chinese manufacturers will desperately look for new destinations for their products – and since Europe is not too enthusiastic about buying many types of Chinese high-tech goods, they may be shipped to Russia at discounted prices. The inflow of cheap Chinese imports may not be associated with a decrease in Russian oil and gas shipments to China, as I do not expect any significant dip in China's energy consumption due to overall industrial production decline, and – if there are no additional U.S. sanctions against Russian energy sector – I do not anticipate any significant decrease in the physical amount of Russian exports due to Trump's tariffs.
There is another trend from which Russia may profit these days. As the trade war between the U.S. and the rest of the world intensifies, war in Ukraine seemingly becomes less important to the major Western powers. President Trump already voiced an intention to walk out of negotiations with Moscow and Kyiv if they do not yield some tangible results in the near future. [24] With high tariffs debated without any linkage to Russia, it is a signal for the Kremlin that the global powers care less about Russia's policies than ever before. I would say that the Russian leadership welcomes such a turn, since it means that the war can continue without any need to restructure current economic policies, to which Russia has mostly accustomed. I would add that if the United States runs into a serious confrontation with Europe, the first and immediate casualty would be American energy exports to the EU. By the end of 2024, the U.S. became the largest exporter of liquified natural gas (LNG) to the European countries, [25] but overall it still ranks third after Norway and Russia, while shipments from Russia went down by a factor of three since 2021, both pipeline and LNG shipments outpace the U.S. supply. [26] Russia is already courting Europe, keeping its eye on increasing the supply to squeeze U.S. LNG out – and soon after the White House announced 20-percent tariffs against EU member states, the Europeans started to consider additional pipeline gas supplies from Russia. [27] If Americans disrupt their energy trade with Europe, Moscow may become a really big winner, securing increasing revenues for Gazprom, which recently recorded a record loss for 2024. [28]
The Tariff War Seems To Not Affect Russia Very Much
To finalize, I would argue that it looks like the tariff war between the U.S. and the rest of the world does not affect Russia very much. As of now, its balance of losses and benefits looks neutral, even while it could easily deteriorate if trade issues drag the global economy significantly down, with commodity prices getting a serious blow. But even such a turn might be outweighed if the conflict between major powers draws their attention away from Moscow and forces them to reconsider Russia's involvement in the Ukrainian war in a way that allows a more active economic cooperation with the Kremlin.
*Dr. Vladislav Inozemtsev is the MEMRI Russian Media Studies Project Special Advisor, and founder and director of the Moscow-based Center for Post-Industrial Studies.
[1] Cnn.com/business/live-news/tariffs-trump-news-04-02-25/index.html, April 2, 2025.
[2] Whitehouse.gov/fact-sheets/2025/02/fact-sheet-president-donald-j-trump-imposes-tariffs-on-imports-from-canada-mexico-and-china/, February 1, 2025.
[3] Barrons.com/articles/stock-market-worst-week-pandemic-2e366e06, April 4, 2025.
[4] Istories.media/opinions/2025/04/07/chem-poshlini-trampa-opasni-dlya-rossii-riskovii-stsenarii/, April 7, 2025.
[5] Axios.com/2025/04/02/trump-tariffs-russia-ukraine-ceasefire, April 2, 2025.
[6] Newsweek.com/russia-trump-tarriffs-trade-2056152, April 7, 2025.
[7] Reuters.com/markets/europe/russian-central-bank-sees-chance-prolonged-low-oil-price-cycle-2025-03-24/, March 24, 2025.
[8] Neftegaz.ru/news/finance/868679-v-putin-podpisal-zakon-o-federalnom-byudzhete-na-2025-2027-gg-chto-s-neftegazovymi-dokhodami/, December 2, 2024.
[9] Neftegaz-expo.ru/ru/ui/17117/
[10] Vedomosti.ru/economics/articles/2025/04/21/1105548-minek-sohranil-prognoz-po-rostu-vvp, April 21, 2025.
[11] Rbc.ru/business/11/04/2025/67f8f7c89a79476b22513e8c, April 11, 2025.
[12] Forbes.ru/finansy/534194-minfin-v-aprele-perejdet-k-prodazam-valuty-po-budzetnomu-pravilu, April 3, 2025.
[13] Center.business-magazine.online/fn_1649119.html, April 15, 2025.
[14] Interfax.ru/business/1017412, March 31, 2025.
[15] Interfax.ru/business/1018771, April 8, 2025.
[16] Goldprice.org/spot-gold.html
[17] Cbr.ru/hd_base/mrrf/mrrf_m/?UniDbQuery.Posted=True&UniDbQuery.From=01.1998&UniDbQuery.To=03.2025
[18] Cbr.ru/hd_base/mrrf/mrrf_7d/
[19] Cnbc.com/2025/04/14/us-dollar-has-plunged-and-euro-soared-on-trump-tariffs.html, April 14, 2025.
[20] Rbc.ru/quote/news/article/67fceaa89a794728b7f34f0c, April 14, 2025.
[21] Lenta.ru/news/2025/03/27/poteri-byudzheta-iz-za-krepkogo-rublya-otsenili/, March 27, 2025.
[22] Interfax.ru/business/1021234, April 16, 2025.
[23] Business-standard.com/world-news/china-s-ports-stall-as-us-tariff-hike-to-145-hits-trade-halts-factories-125041400381_1.html, April 14, 2025.
[24] Politico.com/news/2025/04/18/trump-ukraine-russia-war-00298898, April 18, 2025. This rhetoric currently substitutes a much more aggressive one, promoted by Republican Senator Lindsey Graham and Democratic Senator Richard Blumenthal, who threatened to "slap 500 percent tariffs on countries that buy Russian oil, gas, uranium or other products,' Dailymail.co.uk/news/article-14564323/lawmakers-500-percent-tariffs-russia-trump.html?ito=native_share_article-top, April 3, 2025.
[25] Energypolicy.columbia.edu/bridging-the-us-eu-trade-gap-with-us-lng-is-more-complex-than-it-sounds/, February 20, 2025.
[26] Consilium.europa.eu/en/infographics/where-does-the-eu-s-gas-come-from/
[27] Reuters.com/business/energy/back-russian-gas-trump-wary-eu-has-energy-security-dilemma-2025-04-14/, April 14, 2025.
[28] Forbes.ru/investicii/532997-ne-vse-propalo-o-cem-investoram-govorit-ubytok-gazproma-v-1-trln-rublej, March 19, 2025.