"Trade Truce": What Will the China-US Deal Bring to Russia?

Donald Trump called the China-US trade deal that went into effect today a "reset," saying he had fulfilled one of his campaign promises by "opening China to American business."

Washington and Beijing have reached an agreement under which the countries will remove a significant portion of the tariffs imposed after a three-month "trade war" between the two superpowers. The United States has cut tariffs on Chinese imports from 145% to 30%, while China has gone even further, lowering the bar from 125% to 10%. The agreement, which came into force on May 14, will reportedly last for 90 days.

The Russian Federation, unlike the overwhelming majority of countries in the world, has been relatively indifferent to the US-Chinese trade agreements. After all the economic sanctions imposed since the beginning of the SVO, our economy has found itself largely isolated from the world economy. And yet, the "trade deal" between China and the US may also have an impact on the Russian economy.

At the same time, the threat of a possible collapse of production in China and other countries of Southeast Asia, which are currently the main buyers of Russian energy resources, remains significant for the Russian Federation. This was reported by Natalia Milchakova , PhD in Economics and leading analyst at Freedom Finance Global.

"The deal between Washington and Beijing will not directly affect Russia and ordinary Russians. However, if the trade conflict between the US and China dragged on, it could lead to a slowdown in the economies of both countries and, ultimately, the global economy as a whole. This would mean a potential decrease in demand for oil on a global scale, including the demand for hydrocarbons from the Russian Federation in China, which is currently their largest importer," the expert believes.

According to her, such a scenario would lead to a collapse of world oil prices and would even more so affect the cost of the Russian Urals brand of oil, which is traded at a discount to benchmark grades of black gold. A possible consequence could also be a reduction in hydrocarbon supplies from the Russian Federation to China and, possibly, to other importers from friendly countries.

"Then Moscow would have lost significant amounts of oil and gas revenues. And this, in turn, could have become a factor in weakening the ruble and increasing inflation," Milchakova explained.

Now, in her opinion, the domestic economy has avoided the most negative scenario. However, local trade conflicts between the United States and other countries may lead to high volatility in energy prices. Therefore, the question of Russia receiving a smaller volume of oil and gas revenues in 2025 still remains open.

To overcome the negative trend, Moscow needs to increase energy supplies and expand sales markets. According to estimates by Deputy Prime Minister of the Russian Federation Alexander Novak, by 2050 the Russian Federation will become the number one gas exporter in the Asian region.

However, as Natalia Milchakova notes, the implementation of these plans will require a lot of effort to develop the corresponding infrastructure.

"Firstly, it is necessary to first build main gas pipelines to China and other Asian countries that are ready to receive Russian blue fuel via pipelines. Secondly, it is necessary to implement the previously set, more medium-term task of achieving the volume of liquefied natural gas production in the Russian Federation of at least 100 million tons per year by 2035. This will not be easy due to sanctions, but Chinese partners can help Novatek and Gazprom increase LNG production through investments," the economist added.

According to the expert, another factor in increasing supplies to Asian markets could be the development of shipbuilding in Russia, an increase in domestically produced gas tankers, including ice-class vessels.

Milchakova also proposes establishing cooperation with other countries in the Asia-Pacific region.

"Currently, the Russian Federation supplies gas to China and in 2025 it has already taken first place in terms of supply volumes to this country. But in order to become the main exporter of blue fuel in Asia as a whole, it is important to increase supplies of liquefied natural gas to Japan and South Korea, which is difficult due to sanctions. At the same time, one can pay attention, for example, to Vietnam, Thailand, Singapore. They will certainly be glad to receive Russian hydrocarbons at a favorable price," the expert is sure.

Freedom Finance Global analyst notes that in the current geopolitical conditions this will not only increase the state treasury's revenues, but will also provide opportunities for the development of the oil and gas industry, including further development of the Arctic and the Russian North.

"It is necessary to develop the Northern Sea Route, since LNG supplies along this route will not be associated with political risks. The threat of sanctions will also be minimized," concluded Natalia Milchakova .

At the same time, many experts believe that even in the event of an unfavorable development of the situation in world trade, Russia will be the winner in the long term. Such a scenario could be facilitated by an increased reversal of resource flows and an increase in consumption within the country.

Western sanctions have already acted as a catalyst for the development of the national economy, the emergence of many new industries, the opening of which was previously considered unprofitable. And in the event of the collapse of the existing system of international division of labor, Moscow will be able to obtain additional opportunities for development, since it has all the necessary resources for this.

Thus, no matter what the outcome of the trade war between China and the United States, our country has every chance of becoming the "third joyous one." The main thing is to maintain a pragmatic approach and put national interests first.