Russia’s war vs. America’s economy. Source: THE GZERO NEWSLETTER SIGNAL

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Russia’s war vs. America’s economy

For many Americans, Russia’s war in Ukraine seems far away, and its impact on their lives seems minimal. It’s true that Europe, which has far more trade with Russia than the US does, will face more obvious economic blowback from the war and the sanctions imposed on Russia. But in a globalized world, the shock absorption offered by distance is limited. The war’s most obvious impact on the US economy comes with higher fuel prices, which have sharply increased the price Americans pay for gasoline. Higher fuel costs will also raise transportation costs of all kinds. Meanwhile, rising food prices – Russia and Ukraine are both leading food producers, and Russia and neighboring Belarus are leading exporters of fertilizer – have a broader impact on inflation.

Two factors darken the outlook further. First, these upward pressures on prices compound the inflationary pressures already created by the pandemic and its impact on both global economic growth and international supply chains. Second, Russia’s war in Ukraine is headed toward an unstable stalemate that could delay any return to normal for fuel and food costs. To fight this inflation, the US Federal Reserve has embarked on a gradual increase in interest rates that will be felt everywhere, from the housing market to the stock market.

For all these reasons, the war’s economic impact on US consumers will likely prove broad and long-lasting.

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