One unexpected side effect of Trump’s tariffs

When President Donald Trump unveiled tariffs on more than 180 countries and territories early this month, there was one place that was conspicuously left off the list: Russia.

Initially, White House press secretary Karoline Leavitt told Axios that Russia had been excluded because US sanctions already “preclude any meaningful trade.” But this doesn’t make a lot of sense.

Though the US trades very little with Russia these days, the US slapped a broad 10 percent tariff on most other places — tariffs that are still in force despite a reversal on plans to target different countries with different tariff rates — it doesn’t trade much with, including some uninhabited islands.

Last week, Treasury Secretary Scott Bessent reiterated that it was because the US doesn’t trade with Russia due to sanctions on that country. (Again, a claim that’s not quite accurate.)

But before that, White House economic adviser Kevin Hassett told ABC that the decision had been made because “There’s obviously an ongoing negotiation with Russia and Ukraine, and I think the president made the decision not to conflate the two issues.” Ukraine, the country Russia invaded, was hit with a 10 percent tariff.

But if the Russians were toasting their good fortune in the Kremlin, that probably didn’t last long — because the new tariffs quickly began to disrupt the key part of the Russian economy: energy production.

Oil prices have been dropping precipitously on fears that even a limited US-China trade war — like the one going on now — will trigger a global recession and reduce demand. Despite a brief spike after Trump paused many of the tariffs last Wednesday, global prices have continued to slide to their lowest levels since the Covid-19 pandemic. The latest forecasts project prices will continue to flounder.

That’s very bad news for Russia, a country that depends on oil and gas sales for roughly a third of its government revenues and just hiked defense spending by 25 percent to the highest levels since the end of the Cold War as it works to sustain its war in Ukraine.

Russian Urals grade oil fell to $50 a barrel recently, its lowest level since 2023. It’s rebounded some since then, but Russia’s finance ministry had budgeted for $70-a-barrel oil for 2025 — something that now seems unlikely.

Since Russia invaded Ukraine 2022, the world has been caught in a vicious cycle where the geopolitical turbulence caused by the war helps keep oil prices high, while those high prices allow Russia to keep fighting the war.

These dynamics may now be starting to shift, a development that’s been cause for some early schadenfreude in Ukraine: “The lower the oil prices, the less money Russians will have to fund their war,” Andriy Yermak, Ukrainian President Volodymyr Zelenskyy’s chief of staff, posted on social media.

It’s worth noting that one reason Russia has been able to maintain its war economy despite tight international sanctions is that western governments have been wary about targeting Russia’s energy exports due to fears of spiking global energy prices. Complex workarounds have been devised to allow Russia to keep selling its oil on international markets.

All of this doesn’t mean Russia’s war machine is going to collapse overnight. But with economic growth stagnant and inflation running high, Russia has less room for maneuver than it has in the past — it literally can’t afford oil prices to collapse.

It would be a supreme irony if the Trump administration found a more effective way to attack the most important sector of Russia’s economy while providing a boost to the west’s Ukrainian allies than the Biden administration ever did. Especially if it does so via a trade policy that seems specifically designed not to hurt Russia.

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