Russia’s unexpected decision to increase tariffs on Chinese goods, despite the previously strong trade relationship between the two countries.
Russia has increased tariffs on Chinese furniture hardware from zero to 55.65%. This is significantly higher than the 10% increase applied to similar European products. The new tariffs are also retroactive to 2021.
Increased Scrap Fees on Automobiles In October, Russia announced a significant increase in automobile scrap fees, ranging from 70% to 85%, particularly for foreign car brands. This is notable given that China is Russia’s largest automobile importer, having exported 544,000 vehicles to Russia in 2023 alone.
Reasons for the Tariff Increases:
Increased Government Revenue Tariffs can boost government income, which is crucial for Russia during wartime to alleviate financial burdens.
Protection of Domestic Manufacturing Russia aims to prevent over-reliance on Chinese goods and protect its local industries from being squeezed out by foreign products.
China’s reaction to tariffs: On the surface the higher tariff have created new trade tensions. However, there isn’t a strong public outcry or formal objection from China. Some sources suggest that China has instructed local businesses to “fully assess the potential impact” and adjust their pricing strategies or promote localization in foreign markets, indicating a more pragmatic and adaptive approach rather than direct confrontation.
China’s economic support for Russia’s wartime economy: Many sources strongly suggest that China’s economic activities provide crucial, if not vital, assistance to Russia’s wartime economy. This is not necessarily a direct result of accepting the tariffs, but rather a consequence of the broader shift in their trade relationship.
Market and Inputs: China has become Russia’s most important economic partner, acting as a key market for Russian energy exports (oil, gas, coal) and providing critical imports that Russia can no longer obtain from the West due to sanctions. This includes consumer goods, cars, and, significantly, dual-use items (items with both commercial and military applications) such as microelectronics, semiconductors, and machinery critical for Russia’s defense industry.
Sanctions Evasion: China is assessed to be acting as a “proxy jurisdiction” for Moscow to evade Western sanctions, with Russian entities finding willing partners in China to purchase necessary goods and equipment. Without China’s cooperation, Russia would struggle to finance the war or secure resources for military operations.
Trade Volume: Bilateral trade between Russia and China has surged to record levels since the full-scale invasion of Ukraine, more than doubling since 2020. This growth has outpaced China’s trade with most other countries.
Currency Shift: The Chinese yuan has become increasingly prominent in the Russian economy, with nearly 90% of transactions reportedly settled in yuan and rubles. This helps Russia circumvent restrictions on using dollars and euros.
Strategic Ambiguity: While China officially claims neutrality and avoids direct weapons shipments, its economic and political support is seen as undermining these claims. Beijing is perceived to be balancing its support for Russia with the desire to avoid full Western backlash and secondary sanctions.
In essence, while Russia’s imposition of tariffs on Chinese goods might seem counterintuitive given their close ties, China’s muted objection and continued, extensive economic engagement are interpreted by many as a de facto form of assistance to Russia’s wartime economy, enabling it to sustain its military efforts and mitigate the impact of Western sanctions. This relationship is often described as symbiotic but asymmetrical, with Russia becoming increasingly dependent on China. https://www.facebook.com/jeff.mah.5/videos/704738832146597/?__cft__[0]=AZVt-6HC88bHS9P6TjGkFvKXlMTV6AkjSXm9W8h8nUBH9nq0WLseKQEdk7WvSy_p5jHYPp_A0GvzmAG__rxGLihfS7Ww47aiGZcJcvdCC-FHMJ5QAR1-kKoszg38BavHw6fc4s2-8JS4u5wa9B0wFJ3_39lKwZV6SG517utz2FRoXw&__tn__=%2CO%2CP-R