The U.S. and its allies have taken unprecedented steps to support Ukraine in the face of Russia’s invasion. Ukraine has received substantial military, economic, and humanitarian aid (while Russia has been hit with tough sanctions and export controls).
However, Ukraine’s economic woes remain daunting. The World Bank estimates the Ukrainian economy will contract by 45% this year, depending on the duration and intensity of the war over the months ahead.
What more can be done to help Kyiv’s economy weather the storm?
Recently, the United Kingdom announced it would remove all tariffs and quotas covered by the UK-Ukraine Free Trade Agreement. The move is consistent with the UK’s robust support for Ukraine on multiple fronts.
The European Union on April 27 proposed a similar measure suspending all import duties on Ukrainian goods for one year. The measure would also suspend all EU anti-dumping and safeguard measures in place on Ukrainian steel exports. The proposal must be approved by the European Parliament and the Council of the EU before it takes effect, which is expected soon.
The U.S. should do the same.
While it’s no panacea, suspending U.S. tariffs on imports from Ukraine would help the beleaguered country’s workers and businesses – notably, Ukraine has suspended all of its own import duties. Doing so would require legislation, but Congress has, in recent weeks, shown strong bipartisan support for measures to aid Ukraine.
Ukraine exported a modest $1.9 billion in goods to the U.S. in 2021, according to data from the U.S. Census Bureau. This sum accounted for less than 0.1% of all U.S. imports but approximately 2.8% of Ukraine’s total exports, based on the latest WTO data. Globally, Ukraine’s top exports are seed oils, corn, wheat, and iron and steel products.
Removing tariffs on all imports from Ukraine would have little discernible effect on the U.S. economy. However, it would serve as an act of goodwill to Ukrainian workers, farmers, and companies for whom international trade ties can be a lifeline.
Prior to Russia’s invasion, nearly half of U.S. imports from Ukraine were metals such as iron, pig iron, and steel. With much of Ukraine’s iron and steel production located in the war-torn east of the country, many of its mills have been shuttered or destroyed since the invasion.
While it isn’t clear the country has the capacity to export these metals to the U.S. at present, tariff relief clearly would do no harm. In fact, two U.S. senators proposed the U.S. remove the 25% Section 232 tariff on steel from Ukraine. Senators Dianne Feinstein and Patrick Toomey wrote that this action would be a “small but meaningful way for the U.S. to signal support for Ukraine.” But ultimately, ending these tariffs is at the discretion of the president.
In addition to their terrible human toll on Ukraine, Russia’s invaders have destroyed factories, mined farmland, blocked supply routes, and made refugees of millions of people. An AmCham Ukraine survey found that only 41% of its member companies are fully operational. However, 50% continue to work partially, 29% have relocated within the country, and 19% have relocated outside Ukraine for the time being — showing their resilience.
Considering the magnitude of this disruption, tariff removal would have a minor effect at best. However, it would demonstrate a U.S. commitment to take every step within its means to aid Ukraine in what is sure to be a long and arduous recovery.
While the economic impact of suspending U.S. tariffs on imports from Ukraine may be small, the symbolism is mighty.
Story by Mary Kate Carter, U.S. Chamber of Commerce
Mary Kate Carter is an international Policy Coordinator with the U.S. Chamber of Commerce.