Russia Quietly Imposes Trade Tariffs on Ally China

Chinese carmakers, who rely heavily on Russia as their top export market, now face a steep tax hike that has raised eyebrows in the country.

Newsweek reached out to the Russian and Chinese Foreign Ministries via email for comment.

Why It Matters

Russia’s pre-2022 auto market ranked among the world’s top 10, with most vehicles produced by Western companies. The exodus of these brands in the wake of Russian President Vladimir Putin‘s full-scale invasion of Ukraine hit Russian car manufacturers hard and left a void that was quickly filled with Chinese car companies such as Geely and Chery.

As Beijing and Moscow strengthened ties on the diplomatic and military fronts, bilateral trade rose to new heights, reaching a record $244.8 billion last year, according to Chinese customs data. China’s share in Russia’s auto market also soared from less than 10 percent in 2021 to over 60 in 2023.

What To Know

The influx of Chinese car imports has raised concerns in Russia—much like in the European Union over electric vehicles—that Chinese industrial overcapacity will result in its low-cost goods outcompeting local industries.

In response, Moscow in October ratcheted up its “scrap tax” on imported vehicles by 70 to 85 percent, depending on the size of the engine.

Russia introduced its scrappage tax in 2012 upon joining the World Trade Organization (WTO). Officially, the tax was meant to cover the cost of recycling and disposing of vehicles at the end of their lifespan while also reducing the impact on the environment.

However, in practice, it has served as a tool to protect domestic manufacturers and encourage foreign automakers to set up local production in Russia.

“While Russia wants Chinese vehicles, it is now insisting that carmakers produce them in Russia. The pushback shows how even China’s close geopolitical ally is averse to becoming a dumping ground for Chinese excess capacity,” Gregor Sebastian, a senior analyst with the Rhodium Group think tank’s China Corporate Advisory team, wrote in a December report.

What People Are Saying

Gregor Sebastian, a senior analyst at Rhodium Group’s China Corporate Advisory team: “From January 2025, the recycling fee [comprised] more than a quarter of the price tag. This means that for most OEMs [original equipment manufacturers], Russia’s recycling fees are costlier than the EU’s countervailing duties on Chinese EVs.”

What Happens Next

Chinese authorities have instructed local businesses to “fully assess the potential impact” of the tariff hike and adjust their pricing strategies accordingly or promote localization in foreign markets.