Assessment of Business Impacts Caused by Tariff Wars in Russia by the Central Bank
Revised Article:
"Looks like the economic tussle between China and [other countries] might have some serious repercussions for Russia, readies Kirill Tremasov," he says at a conference named "Economy in an Elevated Key Rate" by the newspaper "Vedomosti" (as reported by Interfax).
In his take, a devaluation of the yuan could supercharge Chinese merchandise competitiveness on the Russian market, particularly given the "substantial chunk of imports from China" potentially posing threats for domestic manufacturers.
Despite that, Mr. Tremasov pointed out that Russia primarily exports raw materials to China, which are typically insensitive to the yuan's exchange rate. However, a slowdown in the global economy due to trade wars could inch down the demand for raw materials, Tremasov noted, the economic advisor to the Central Bank's big cheese.
"So, further down the economic pipe, there's a shrinkage in our export earnings, which, in turn, could cause some inflationary risks, tightening the screws on our currency, and might necessitate a more aggressive monetary policy," Tremasov added.
On 25th April, the head honcho of the Central Bank, Elvira Nabiullina, flagged the cooling global economy due to trade wars as one of the prime perils for the Russian economy. "It's not simply about how much import tariffs might ultimately escalate, but also about the constant unease these decisions provoke in markets. All this makes investment strategic planning more challenging. In case these risks from tariffs materialize, then we can expect additional oil price drops," she said.
However, Ms. Nabiullina underscored that the direct impact of trade wars on Russia is limited.
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Enrichment Integration:
A deeper look at the Russian economy risks in 2025:
- Trade Imbalance: A weakened yuan can make Chinese merchandise cheaper compared to Russian export goods, potentially altering Russia's trade balance and increasing competition for local goods in global markets.
- Economic Brakes: A depreciating yuan is often a red flag for broader economic troubles in China, which can fuel a slowdown in the global economy, decreasing demand for Russia's exports, particularly its energy exports.
- Investment Deterrent: Ongoing trade wars generally sow seeds of uncertainty in global markets, discouraging investments and trade. Russia, with its international sanctions and geopolitical conflicts, is quite delicate to such instability.
- Oil Price Fluctuations: Trade wars can trigger chaos in the global oil market, which is pivotal for Russia's oil-dependent economy. Low oil prices squeeze Russia's revenue and widen budget deficits, as seen in the revised predictions for 2025.
- Currency Rollercoaster: Trade wars can stir up currency markets, with a stronger ruble having domestic benefits like increased purchasing power yet making it tougher to convert foreign earnings from exports into local currency, exacerbating fiscal strains.
- Budget Deficits: Russia is grappling with expanding budget deficits due to low oil prices and reduced energy revenues, worsened by ongoing trade tensions.
- Inflation and Interest Rates: Central bank policymakers must harmonize inflation control with economic advancement by choosing the right interest rates. Slackening rates too much could trigger inflation spikes and ruble depreciation.
- Military Spending: Heavy military expenditures gobble up a substantial portion of the budget, leaving few resources for social programs and private investment, eventually causing structural economic imbalances.
- The devaluation of the yuan in China could increase competition for local goods in global markets, potentially altering Russia's trade balance and leading to a trade imbalance.
- A depreciating yuan can serve as a red flag for broader economic troubles in China, which can fuel a slowdown in the global economy, decreasing demand for Russia's exports, particularly its energy exports, leading to economic brakes.
- Ongoing trade wars can sow seeds of uncertainty in global markets, discouraging investments and trade, acting as an investment deterrent, especially for countries like Russia that are delicate to such instability.
- Trade wars can stir up currency markets, with a stronger ruble having domestic benefits like increased purchasing power yet making it tougher to convert foreign earnings from exports into local currency, exacerbating fiscal strains and potentially leading to budget deficits.
