Trump wields tariffs to sway Putin on Ukraine. Here's how they might work, or not

San Francisco Chronicle​

4 days ago

WASHINGTON (AP) — Russian President Vladimir Putin has sacrificed an estimated 1 million of his soldiers, killed and wounded, in a three-year campaign to crush Ukraine.
Now President Donald Trump is betting that his go-to economic weapon — tariffs — can succeed where Ukrainian drones and rockets haven't, and finally persuade Putin to end his war.
Tariffs, which the U.S. president has called ' the most beautiful word in the dictionary,'' are taxes on imports. They are Trump's all-purpose fix — a tool he deploys to protect American industry, lure factories to the United States, tackle drug trafficking and illegal immigration, and raise money to pay for his massive tax cuts.
On the campaign trail last year, Trump promised he'd negotiate an end to the Russia-Ukraine conflict in 24 hours. But months have passed without a peace deal, and the president has recently expressed frustration with the Russians. 'We're very, very unhappy with them ... I thought we would have had a deal two months ago, but it doesn't seem to get there,' Trump told reporters Monday.
So in addition to agreeing to send more weapons to Ukraine, he's once again unsheathing tariffs.
He said Monday the U.S. would impose 100% tariffs on countries that buy Russian oil, natural gas and other products if there isn't a peace deal in 50 days. The levies are meant to cause Russia financial pain by making its trading partners think twice before buying Russian energy.
'I use trade for a lot of things,'' Trump said, "but it's great for settling wars.'
'Unilateral tariffs are likely to be ineffective in influencing Putin's actions,' said Douglas Irwin, a Dartmouth College economist who studies American trade policy. "Financial sanctions in cooperation with European and other allies are much more likely to damage Russian economy, but whether they soften Russia's approach is also uncertain.''
The secondary tariffs idea isn't new. Republican Sen. Lindsey Graham of South Carolina and Democratic Sen. Richard Blumenthal of Connecticut earlier this year introduced legislation that would impose a 500% tariff on countries that buy Russian oil, petroleum products and uranium.
If Trump goes through with his threat, his 100% tariffs have the potential to disrupt global commerce and push oil prices higher. They might also complicate Trump's efforts to strike separate trade deals with countries like China and India.
The 100% tariffs would likely target China and India
Since December 2022, when the European Union banned Russian oil, China and India have bought 85% of Russia's crude oil exports and 63% of its coal, according to the Centre for Research on Energy and Clean Air, a Finnish nonprofit. So they would likely be the two countries most affected by Trump's 100% import taxes.
Trump has already tangled with China this year, and things did not go well.
In April, Trump plastered a 145% levy on Chinese imports, and Beijing counterpunched with 125% tariffs of its own. The triple-digit tariffs threatened to end trade between the world's two biggest economies and briefly sent financial markets reeling. China also withheld shipments of rare earth minerals used in products such as electric vehicles and wind turbines, crippling U.S. businesses.
After showing how much pain they could inflict on each other, the United States and China agreed to a ceasefire. A new 100% secondary tariff 'would blow up that deal,' said Gary Hufbauer, senior fellow at the Peterson Institute for International Economics.
'China is particularly well-placed to hold out,' said Nicholas Mulder, a Cornell University historian. "All this would get us back to a position of full confrontation that would be uncomfortable for all sides.''
Hufbauer also noted that the secondary tariffs would also likely end 'any rapprochement with India'' — the world's fifth-biggest economy and one with which Trump is pursuing a trade deal.
Energy prices could climb
If Trump goes ahead with the tariffs, 'it would invariably lead to higher global energy prices,'' especially for natural gas, economists Kieran Tompkins and Liam Peach of Capital Economics wrote in a commentary Monday.
Other oil-exporting countries have enough spare capacity to ramp up production and offset any loss of Russian oil exports in global market. But if they did, the world would have no buffer to rely on if there were an oil shock caused by, say, conflict in the Middle East — and prices could skyrocket.
'Removing that spare capacity would be akin to riding a bike with no shock absorbers,'' Tompkins and Peach wrote.
The Russian economy has been resilient
After Putin's full-scale invasion of Ukraine in February 2022, the United States and its allies slammed Russia with sanctions.
Among other things, the U.S. froze the assets of Russia's central bank and barred some Russian banks from using a key international payments system run by Belgium. With its allies from the Group of Seven rich nations, it also capped the price that importers could pay for Russian oil.
The sanctions were expected to crush the Russian economy, but they didn't. Putin put Russia on a wartime budget, and high defense spending kept unemployment low.
Military recruits were given big sign-up bonuses and the families of the fallen received death benefits, pumping income into some of Russia's poorer regions. To keep its oil sales going, Russia deployed "shadow fleets,'' hundreds of aging tankers of uncertain ownership and dodgy safety practices that delivered oil priced above the G7 price cap.
'The experience of the G7 oil price cap against Russia showed how challenging the enforcement of measures against the Russian oil trade can be,' Mulder said.
Last year, the Russian economy grew 4.1%, according to the International Monetary Fund.
But strains are showing, partly because Putin's war has made Russia a pariah to foreign investors. The IMF forecasts growth will decelerate to 1.5% this year, and last month the Russian economy minister warned the country is "on the brink of going into a recession.''
Trump's tariffs could increase the pressure, in part by driving down Russia's energy exports — and the revenue the Russian government collects from an energy tax.
Tariffs are mostly untried as a diplomatic lever
'To my knowledge, tariffs have never been applied as an explicit anti-aggression measure,' said Mulder, author of a 2022 history of economic sanctions. "I am skeptical that the secondary tariffs threat will be effective.''
For one thing, he said, it's unclear whether Trump will actually impose them after 50 days. The president has repeatedly announced tariffs against other countries, and then sometimes suspended or tweaked them.
For another, the secondary tariffs would target countries — namely China and India — that might have some sway in Moscow. 'The United States needs cooperation and collaboration to bring Russia to the negotiating table,' said Cullen Hendrix, senior fellow at the Peterson Institute. "Threatening to harm the actors who actually have leverage over Moscow may backfire.''