New customs tariffs will leave Armenia facing less choice in consumption

New import customs duties came into force in Armenia on January 1, 2020, affecting prices for more than 700 goods from countries that are not members of the Russian-led Eurasian Economic Union.

Armenia has been a member of the EAEU for five years; the other member states include Russia, Belarus, Kazakhstan and Kyrgyzstan as well. The ultimate goal of the EAEU is the formation of a single market,

The customs deal now coming into play in Armenia was struck in 2015 by EAEU members. At the time, Armenia received an additional five years to adapt its economy to changes and mitigate their negative impact.

The Ministry of Economy of Armenia suggests that the impact of changing rates on inflation will be half a percent, and will not lead to a large jump in prices. The public is skeptical.

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What goods will rise in price?

Poultry, cattle, rice, sunflower, butter, dairy products and medicines are some of the main items on the list.

Poultry meat is imported to Armenia mainly from the USA, Brazil and Ukraine.  Up until 2020, the tariff was 22%.  After the changes, the rate grew by 3%.

Cattle meat is imported to Armenia for the most part not from the EAEU countries, but from India, Ukraine and Brazil, on which import duties rose from 12.5%  to 15%.

Tariffs for the import of rice increased by 3%, while sunflower, butter and dairy products went up by 2%.

Medicines also become more expensive, import duties on them increased by 2-4%.

Cars imported from third countries will become more expensive, customs excises rising several times.

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Experts say the first wave of price increases can be expected at the end of January 2020.

Economist Vahagn Khachatryan says the increase in customs duties will leave to an increase in the prices of other goods as well – not only the ones facing new tariffs – as the multiplier effect takes hold.

“All this will affect our citizens and negatively affect the housekeeper. In EAEU countries, customs duties are on average 2.7 times higher than in Armenia. I’ll also note that before joining the union, Armenia pursued an open door policy when duties did not exceed five to ten percent.”

Khachatryan says residents of Armenia will have less choice when it comes to consumption:

“We will not be able to buy many of the products we are used to. A business that imports, for example, household or agricultural machinery, will understand that it cannot withstand competition. We will not buy Korean but Russian TVs,” says economist Vahagn Khachatryan.