Quantifying the impact of the latest U.S. tariff sanctions on Russia - a sectoral analysis

Following the recent G7 Summit in Germany, the United States announced a new sanction package that imposes significantly higher tariffs on products from Russia. These tariff increases concern 570 groups of products affecting more than $2 billion in imports from Russia. The declared objective of these tariff increases is to impose steep economic costs on Russia, while minimizing costs to U.S. consumers. The United States is also considering disbursement of revenues collected from these new tariffs to Ukraine. Using a sector-specific partial-equilibrium model and the most reliable data available, this paper quantifies the welfare impact that the U.S. tariff increases will have on the Russian and the U.S. economies, respectively. We find that the new U.S. tariff sanctions will affect $2.6 billion of U.S. imports from Russia (or 8.7% of total U.S. imports from Russia). Moreover, these new tariff measures may decrease Russian welfare by $181 million per year, while imposing annual costs of $90 million on U.S. consumers. The United States can hope to collect $241 million per year in tariff revenues that may then be used to financially support Ukraine. Our sectoral analysis shows that the U.S.' choice of target sectors produces mixed results. On one hand, the sanctions cover dozens of sectors whose inclusion produce particularly large welfare losses to Russia and/or high welfare gains to the United States. Yet, the sanctions package also raises serious questions about its effectiveness for other sectors. For example, higher tariffs for several selected sectors result in zero harm to Russia, and/or greater harm to the United States than to Russia. These and other insights may provide guidance for the design of future tariff sanctions by G7 Members and other Allies.