US slashes Russia trade status and bans imports of alcohol and seafood

President Joe Biden has announced the US will downgrade its trade status with Russia as punishment for its invasion of Ukraine and also ban imports of Russian seafood, alcohol and diamonds.

The broad trade shift, which revokes the “most favoured nation” (MFN) status for Russia, is being taken in coordination with the European Union and Group of Seven countries.

“The free world is coming together to confront Putin,” Mr Biden said from the Roosevelt Room of the White House.

Stripping most favoured nation status from Russia would allow the US and allies to impose higher tariffs on some Russian imports, increasing the isolation of the Russian economy.

Mr Biden’s changes on Russia’s trade status come as bipartisan pressure has been building in Washington to revoke what is formally known as “permanent normal trade relations” with Russia.

Ukrainian President Volodymyr Zelensky pressed the US and allies to take the action against Russia in remarks to Congress over the weekend.

This week’s moves are the latest for the sanctions that have crippled the Russian economy and a sign that the US and its allies will continue to use their financial heft to retaliate against Russian President Vladimir Putin.

The other measures include the freezing of central bank assets, limits on exports and sanctions against Russian oligarchs and their families. These financial tools have led to the Russian rouble losing 76% of its value against the US dollar over the past month, which has caused destructive inflation that could erode Mr Putin’s ability to wage a prolonged war in Ukraine.

The earlier sanctions on imports of Russian oil, gas and coal cut off about 60% of US imports from the country.

Most favoured nation status has been a baseline for global trade, ensuring that countries within the World Trade Organisation (WTO) are treated similarly.

Some countries in the WTO have special privileges due to their status as developing economies. Russia would join the ranks of Cuba and North Korea by not having MFN status from the US.

The revocation carries mostly symbolic weight. Because Russian imports into the US are primarily natural resources, they would generally face little to no increase in their tariffs because of the lost status, Ed Gresser of the Progressive Policy Institute in Washington, said in an online post.

Instead of the current tariff rate, buyers of Russian goods would pay rates established under the Smoot-Hawley Tariff Act of 1930, which disrupted trade during the Great Depression. This would still be zero for uranium, rhodium, palladium, silver bullion and king crabs. But the import tax would shoot up for unwrought aluminium, plywood, semi-finished steel and diamonds, among other products.

On Monday, Democrats on the powerful House Ways & Means Committee posted, then removed, an announcement on a bipartisan bill to ban Russian oil imports and slap further trade sanctions on the country, according to an aide, because of pushback from the White House against acting before Mr Biden had coordinated with allies and reached a decision on both matters.

The House voted on Wednesday on a narrower bill to ban Russian energy imports after Mr Biden instituted the ban by executive order.

Canada was the first major US ally to remove most favoured nation status for Russia last week.

Mr Biden’s action was first reported by Bloomberg News.