WASHINGTON — President Biden on Friday said the United States would join the European Union and other allies in stripping Russia of permanent normal trade relations and would take other steps to curtail trade with Russia as Western nations extended sanctions over the invasion of Ukraine.
The moves, which would be taken in concert with the Group of 7 countries, would allow countries to raise tariffs on Russian goods and would deny Russia the ability to borrow money from multilateral institutions like the International Monetary Fund and the World Bank.
Mr. Biden also said he planned to sign an executive order on Friday that would ban certain imports into the United States from Russia, including seafood, vodka and nonindustrial diamonds. This would deny Russia more than $1 billion in export revenues, according to White House estimates.
The president also plans to bar American exports of luxury items to Russia, including high-end watches, luxury vehicles, alcohol, jewelry and apparel, items that amount to about $550 million per year. The administration said the executive order would also give the president authority to ban new U.S. investments in other sectors of the Russian economy, beyond the existing ban on such investment in Russian energy.
In remarks on Friday, Mr. Biden said that revoking Russia’s permanent normal trade status would “make it harder for Russia to do business with the United States, and doing it in unison with other nations that make up half of the global economy will be another crushing blow to the Russian economy.”
Stripping Russia of its trade status would require congressional approval and trade experts said that while the move would carry heavy symbolism, it might have a limited economic impact compared with the sanctions already imposed.
Chad Bown, a senior fellow at the Peterson Institute for International Economics, said the measure would raise U.S. tariffs on Russian products from 3 percent to about 32 percent on average.
“However, the trade impact on Russia of such a tariff hike would be small, as the United States is not a particularly sizable export destination for Russian products,” he said. Russia was the 20th largest supplier of goods for the United States in 2019, sending mainly energy products and minerals.
Each country will follow their own domestic process to make this change, the administration said. The European Union will be required to consult with its member countries. Canada announced last week that it would withdraw most favored nation tariffs for both Russia and Belarus, a close Russian ally.
In the United States, the task falls to Congress, which has already been considering the measures.
House Democrats first proposed two weeks ago to strip Russia of its trading status and begin a process to expel the country from the World Trade Organization. Earlier this week, top Democratic and Republican lawmakers said they would include the measures in a bill to penalize Russia, but Democrats ultimately stripped out the provision to remove Russia’s special trading status at the White House’s request.
“It was taken out because the president wants to talk to our allies about that action, which I think is appropriate,” Representative Steny Hoyer, Democrat of Maryland and the majority leader told reporters earlier this week.
Speaker Nancy Pelosi said on Friday the House would take up legislation to formalize the revocation of Russia’s trading status when it returned to Washington next week.
“It is our hope that it will receive a strong, bipartisan vote,” she said.
The European Union started a process a week ago to pave the way for higher tariffs on Russian goods or an import ban, but the bloc’s 27 member countries must agree on how to carry it out. Even when they do, any change would not allow for an immediate increase in import duties on Russian products.
The European Union took steps earlier to bar 70 percent of imports from Belarus, including potash and goods made of steel and wood, for enabling Russia’s invasion of Ukraine. Brussels was waiting for the bloc’s suspension of Russia’s “most favored nation” status before taking similar action against Moscow.
The moves come in addition to an array of harsh sanctions already announced by the United States and its allies. Western governments have taken action to reduce their energy trade with Russia, freeze the assets of Russian officials and oligarchs, and cut the country off from the dollar-denominated global financial system.
Governments have banned exports of advanced technology to Russia and transactions with the Russia’s central bank, which has made it impossible for Russia to prop up the value of its currency. On Friday, the Bank for International Settlements, which provides banking services to the world’s central banks, said it was no longer providing services to Russia.
This week, the Russian government fired back by announcing it would place its own restrictions on its exports, including of raw materials.
The White House has been under increased pressure in recent days to respond to Russian attacks in Ukraine, which have included what the Ukrainians have called the indiscriminate shelling of buildings and targeting of civilians. The White House has warned that Russia may also use chemical weapons against Ukrainians, but has repeatedly reiterated that Mr. Biden will not send American troops into the fray.
The Russia-Ukraine War and the Global Economy
Rising concerns. Russia’s invasion on Ukraine has had a ripple effect across the globe, adding to the stock market’s woes and spooking investors. The conflict has already caused dizzying spikes in energy prices, and could severely affect various countries and industries.
Instead, the administration has focused on ratcheting up economic pressure.
“What I would tell you is that when I said we have not let anything go unanswered, what I mean is that we have amped up a range of military and security assistance, a historic amount to Ukraine, including a range of defensive weapons, which we’ve expedited the delivery,” Jen Psaki, the White House press secretary, told reporters on Thursday.
“And we have basically crushed the Russian economy,” she said.
The administration said Friday that Mr. Biden had spoken with President Volodymyr Zelensky of Ukraine and told him about the measures, saying they would put further pressure on Russia.
The impact of revoking Russia’s preferential trade status remains to be seen.
The rules of the World Trade Organization require that all members grant each other “most favored nation” trading status — which the United States also calls “permanent normal trade relations” — in which goods can flow at lower tariff rates between countries. If the United States suspends that trading status, the tariffs charged on Russian products would revert to rates set by the 1930 Smoot-Hawley Tariff Act.
Under those 1930 rates, the tariffs that would be applied to some of Russia’s most critical exports to the United States, like minerals and chemicals, would still be very low, according to research by Ed Gresser, the director for trade and global markets at the Progressive Policy Institute.
Mr. Gresser said the Smoot-Hawley tariffs of the 1930s were designed to charge high tariffs on imports of manufactured goods and farm products, but low rates on imports of raw materials, in order to limit costs for U.S. factories. As a major energy and mineral producer, much of what Russia sends the United States falls into those categories.
The U.S. tariff on palladium, for example, which is used in catalytic converters, would remain at 0 percent both before and after the change, according to Mr. Gresser’s research. Tariffs on other significant exports from Russia, like king crab, uranium and urea, which is used in fertilizer, would also remain at 0 percent.
Tariffs would be somewhat higher for other products, like unwrought aluminum alloy, birch-faced plywood, bullets and certain steel products.
Energy imports from Russia — which accounted for about 60 percent of what the U.S. imported from Russia last year — would face slightly higher tariffs. But Mr. Biden already announced earlier this week that the United States would stop all shipments of Russian oil, gas and coal, a far more sweeping measure.
Mr. Gresser said that revoking Russia’s preferential trading status would impose some penalties, “but in most cases not very significant ones.”
“It may nonetheless be an appropriate symbolic and moral gesture, in particular if many W.T.O. members join in it,” he wrote. “But as a policy measure meant specifically to impose economic cost, the energy import ban is the one with practical real-world impact.”
Other governments could challenge these steps by bringing a case against the United States, the European Union or other countries at the W.T.O. But the global trade body offers large exceptions for actions taken to protect national security, and the United States and Europe could cite this in their defense.
Catie Edmondson, Katie Rogers, Alan Rappeport and Liz Alderman contributed reporting.
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