What Russia's loss of 'market economy' status mean to its economy

The United States has revoked Russia’s market economy status, a move that could open doors to tougher trade actions amid tense relations between Moscow and Washington.

The status, granted two decades ago, limited the calculation of anti-dumping duties on Russian goods.

As the US Commerce Department announced the measure on Thursday, it could raise tariffs for Russian imports, already limited by the unprecedented sanctions western countries have imposed over Russia’s conflict with Ukraine.

"This decision gives the United States the ability to apply the full force of the [anti-dumping] law to address the market distortions caused by increasing interference from the Russian government in their economy," the US Commerce Department said in a statement.

According to the department, “extensive” Russian government involvement in its economy has led to distorted prices and costs, affecting how Russian companies are pricing imports into the United States.

What is ‘dumping’?

Dumping takes place when a foreign producer sells products in the US at a price below domestic price, or lower than its cost of production.

According to the Commerce Department’s analysis, such “unfair imports” can put US industries at a disadvantage when trying to compete on the global arena.

The determination of a market economy status is based on an evaluation of criteria such as currency convertibility, government control of means of production, and foreign investment climate.

"Commerce found extensive backtracking in these areas, particularly since the invasion of Ukraine," the department said.

‘Counterintuitive’ 

Russia’s Ambassador to Washington Anatoly Antonov criticized the move as “counter-intuitive” in a social media post on Friday.

Eleven other countries, including former Soviet states in central Asia, as well as China and Vietnam, are considered non-market economies by the US.

Washington granted Russia market economy status in 2002, an essential step for Russia's admission to the World Trade Organization (WTO) in 2012.

Last year, the American Chamber of Commerce in Russia said that Moscow would be able to challenge any US decision to strip Russia of its market economy status at the WTO.