Russian Central Bank Warns Of Domestic Risks Over US-China Tariff Wars

A potential consequence of tariff wars triggered by the new U.S. administration’s decisions for Russian businesses could be the weakening of the Chinese RMB Yuan, and consequently increased competitiveness of Chinese manufacturers in foreign markets, including Russia, Kirill Tremasov, an advisor to the Central Bank of Russia’s governor has stated.

Tremasov said that “One possible scenario is that the parties go too far in this confrontation, and the result could be a weakening of the Chinese currency. This in turn increases the competitiveness of Chinese goods in other markets, including our country’s markets. We have a significant share of imports from China. And from this side, risks may arise for Russian producers if there is a massive influx of Chinese goods into the Russian economy. At the same time, our exports to China are mainly commodity-based and are less sensitive to China’s exchange rate. Therefore, the impact on exports will be insignificant, while the impact on imports could be substantial, which may create certain risks for the Russian economy.”

The most obvious consequence of trade wars is a slowdown in the global economy, resulting in cooling demand for commodities, which constitute the bulk of Russian exports. “Therefore, further along the economic chain there is a reduction in our country’s export revenues, and this in turn may put pressure on the national currency, creating certain inflationary risks from this side, and may require us to implement tighter monetary policy,” he said.