At first glance, Russia and Ukraine seem like second and third tier economic powers, making it easy to underestimate their ongoing war’s potential to disrupt the global economy and U.S. markets.

But don’t be fooled.

Russia’s annual output before the war was $1.59 trillion, ranking 11th among nations, just below Canada. Ukraine’s annual GDP is nearly $165 billion, about one-tenth the size of Russia’s. If both of their economies were combined, Italy’s would still be larger at $1.94 trillion. While not insignificant, their economies are dwarfed by the United States and China’s combined economic output of $30 trillion.

Measured by total trade—annual imports plus exports—neither Russia nor Ukraine ranked among the top 15 trade partners for the United States. In capital flows, only 7% of annual U.S. foreign direct investment (FDI) flowed to Russia, and Russia’s annual FDI in the United States averaged $4 billion.

So the Russo-Ukrainian war’s economic impact seems like a pebble thrown into a lake—a small splash. But there could be other far-reaching ripples beyond rising energy prices. Consider:

  • The fallout to global supply chains that have not fully recovered from COVID-19 disruptions. Russian and Ukrainian seafarers make up one-seventh of the global shipping workforce and are often staffed as officers vital for vessel operations. Maritime shipping is responsible for the movement of nearly 90% of global trade; its backup alternative—air freight—has already been interrupted by closings of Russian and Ukrainian airspaces to commercial aircraft.
  • Russia and Ukraine are the world’s breadbasket, accounting for 12% of all exported calories globally. A third of the world’s exported barley and a fourth of its wheat come from those two nations. The war is likely to shrink global supplies and inflate prices. Also, potash—a key component in the vast amounts of fertilizer exported from sanctioned Russia and its ally Belarus—likely will rise in price and further drive up agricultural costs worldwide.

The war’s indirect consequences for wider global food markets are gloomy. Higher crop prices will translate to higher livestock feed prices and, ultimately, higher meat prices. Global food stocks are already running worryingly low, 31% below their five-year average. Early estimates of near-term effects suggest that the average consumer in the developed world may have to spend twice the usual fraction of income on food (10% instead of 5%) before the adverse effects recede. The picture is far starker in the developing world, where food expenses may skyrocket from 20% of income to 34% by 2023.

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