If your company sources components from China or India, your cost structure could change overnight. Last week, President Trump greenlit the bipartisan Sanctioning Russia Act of 2025, and Senator Lindsey Graham says a vote could come as early as this week.
The bill's central mechanism: a mandatory 500% tariff on all imports from any country that continues purchasing Russian oil, gas, or uranium. That's not a typo. Five hundred percent.
China and India together buy roughly 85% of Russia's crude oil exports. If Congress passes this bill, and the president decides to pull the trigger, every product you source from those countries gets repriced. The supply chain you spent years building could become economically unworkable in 15 days.
This isn't theoretical. The bill has 84 Senate cosponsors, crossing the veto-proof threshold. It has over 100 House cosponsors. And now it has presidential backing.
What Happened
The Bill Gets Green Light
On January 7, 2026, Senator Graham announced that President Trump had "greenlit" the Sanctioning Russia Act following a White House meeting. The bill, originally introduced in April 2025 by Graham and Senator Richard Blumenthal (D-CT), had been stalled during failed peace negotiations with Russia.
The logjam broke. Graham indicated a floor vote could happen "as early as next week," meaning the Senate could act before the end of January.
How the 500% Tariff Works
The Sanctioning Russia Act authorizes (and in some cases mandates) the president to impose tariffs of up to 500% on imports from countries that "knowingly" purchase Russian oil, gas, uranium, or other products tied to financing the war in Ukraine.
Under the bill, the president has 15 days after making a "covered determination" to increase tariff rates on all goods and services from the targeted country. This tariff stacks on top of any existing antidumping or countervailing duties under the Tariff Act of 1930.
The targeted countries are explicit in Congressional statements: China, India, and Brazil. China purchased nearly half of Russia's crude oil exports in November 2025. India took about 38%. Brazil ramped up purchases after the 2022 invasion but has recently reduced imports.
Secondary Sanctions Layer
Beyond tariffs, the bill mandates secondary sanctions on foreign financial institutions and entities that facilitate transactions for Russia's energy sector. For non-US companies, this means potential exclusion from the US financial system, including the SWIFT banking network.
This is where compliance gets complicated. Secondary sanctions extend the reach of US jurisdiction to non-US persons who provide "material assistance" to blocked entities. Your international banking relationships, your foreign suppliers' banking relationships, and your logistics partners' relationships are all in scope.
What It Means
Tariffs as Sanctions: Uncharted Territory
Here's our read: this bill represents a fundamental shift in how the US government thinks about economic coercion.
Traditional sanctions work by blocking specific persons, entities, or transactions. They're surgical (when they work). Tariffs, by contrast, are blunt instruments that hit entire countries' exports regardless of whether individual transactions involve sanctioned activity.
This is an untested approach. Unlike traditional sanctions that target specific bad actors, tariff-based coercion punishes entire economies and puts the US in a game of chicken with major trading partners. No one knows whether a 500% tariff threat will actually deter India and China from buying Russian oil, or whether they'll call the bluff.
But here's what matters for your business: you can't wait to find out.
The Supply Chain Math
Let's run the numbers. Say you're importing $10 million in components annually from China. A 500% tariff means you pay five times the value of the goods as an additional import tax: $50 million in tariffs on top of the $10 million in goods. Your $10 million line item becomes $60 million overnight, and that's before any existing duties. Your margin just evaporated. Possibly your entire business model with it.
Even if you think the tariff won't be imposed, or won't last, or will be negotiated down, the uncertainty alone changes procurement decisions. Customers will ask about contingency plans. Investors will ask about supply chain concentration. Your board will want answers.
A Counterpoint Worth Considering
Some trade analysts argue that the tariff threat is primarily a negotiating tool, designed to bring China and India to the table rather than actually be implemented. A 500% tariff on Chinese goods would also devastate American consumers and retailers who depend on those imports.
That's true. But relying on the administration to prioritize consumer prices over foreign policy goals is a risky bet. The current administration has shown willingness to absorb short-term economic pain for strategic objectives.
The Compliance Cascade
Even if the tariff provision never triggers, the secondary sanctions provisions create immediate compliance obligations.
Under the bill's framework, OFAC can target foreign financial institutions that facilitate transactions for Russia's energy sector. In October 2025, Treasury designated Rosneft and Lukoil as SDNs, along with dozens of subsidiaries. The EU has separately sanctioned Indian refineries like Nayara and Chinese refineries processing Russian crude. The compliance net is widening.
If your supply chain touches any entity that processes Russian crude, you have exposure. That exposure exists regardless of whether you ever deal with Russia directly.
How Deep Does Liability Go?
A common question: what if you're several tiers removed from a sanctioned entity? Say your company sells to Company A, which sells to Company B, which supplies a sanctioned Indian refinery. Are you liable?
The short answer: probably not, unless you knew or should have known where the goods were headed.
OFAC's standard turns on "knowledge," but that includes willful blindness. Here's how the risk breaks down by distance:
One tier removed (you sell directly to sanctioned entity): Clear violation. Full liability.
Two tiers removed (you sell to someone who sells to sanctioned entity): Risky if you had any indication of the end destination. Red flags like unusual payment routes, reluctance to identify end-users, or shipping through known transshipment hubs (UAE, Turkey, Kazakhstan) create constructive knowledge.
Three or more tiers removed: Generally low risk for ordinary commercial goods, unless you deliberately structured the deal to obscure the destination or ignored obvious warning signs.
The product matters too. General commercial goods at three tiers of separation? OFAC isn't coming for you. Specialized refinery equipment or dual-use technology? The diligence expectation is much higher regardless of how many intermediaries sit between you and the end-user.
One more wrinkle: Nayara, the Indian refinery sanctioned by the EU for processing Russian crude, isn't currently on the US SDN list. But Rosneft, which owns 49% of Nayara, is. The 50% ownership rule means any entity majority-owned by a sanctioned party is treated as sanctioned itself. Minority stakes create ambiguity that compliance teams need to track.
The practical takeaway: You don't need to trace every component to its final destination. But you do need a defensible due diligence process, especially if your products could plausibly end up in sanctioned hands. "I didn't ask" isn't a defense if a reasonable company in your position would have asked.
The Board Conversation
This development will come up in your next board meeting or investor call. Here's how to frame it:
The risk: Supply chain concentration in countries targeted by secondary sanctions creates single points of failure that could trigger overnight cost increases of 500% on imported inputs.
The mitigation: You need a documented assessment of supply chain exposure to tariff-targeted countries, a sourcing diversification roadmap, and contractual provisions that allocate tariff risk appropriately.
The timeline: The Senate could vote within days. Even if passage takes longer, prudent companies are stress-testing now.
Your board will want to know: What percentage of COGS comes from China and India? What's the alternative sourcing plan? What's the timeline to qualify backup suppliers?
If you don't have answers, that's the gap to close this quarter.
Practical Takeaways
These are actions your team can assign this week:
1. Audit your China and India exposure. Pull a complete list of Tier 1 suppliers in tariff-targeted countries, including estimated annual spend. This is your baseline risk assessment.
2. Map your Tier 2 and Tier 3 suppliers. Your direct suppliers may source from China or India even if they're not located there. Ask for origin documentation.
3. Review contracts for tariff allocation clauses. Check whether your supplier agreements include provisions for tariff pass-through. If not, you're absorbing the risk.
4. Identify alternative sourcing options. For critical components, begin qualification of backup suppliers in non-targeted countries (Vietnam, Mexico, domestic). Qualification cycles can take 6-18 months.
5. Update your sanctions compliance screening. Ensure your due diligence process screens for connections to Russian energy transactions, not just SDN list matches.
6. Brief your CFO on cash flow scenarios. Model the impact of a 500% tariff on your top 10 China-sourced inputs. Even if you think it's unlikely, the exercise reveals concentration risk.
7. Add supply chain resilience to board materials. Your next board deck should include a one-page summary of tariff exposure and mitigation status.
8. Review customer contract reps. If your customers have supply chain compliance requirements, a tariff-triggered sourcing change could implicate those reps.
What We're Watching
Senate floor vote on S.1241: Expected as early as this week, though timelines have slipped before. The veto-proof cosponsor count suggests passage is likely if it reaches the floor.
OFAC designation activity: Watch for new secondary sanctions targeting refineries and trading entities in India and China. These create immediate compliance obligations.
EU LNG import ban: Takes effect April 25, 2026. Combined with US secondary sanctions, this accelerates the squeeze on Russian energy revenues and increases the likelihood of tariff triggers.
USMCA review negotiations: The broader US-Mexico-Canada trade renegotiation could reshape North American sourcing economics, offering an alternative to tariff-exposed Asian supply chains.
China and India's response: Both countries have signaled they won't bend to unilateral US tariff threats. How they respond to passage could determine whether this becomes a prolonged trade standoff or a negotiating leverage point.
The Russia Sanctioning Act reframes supply chain risk from a compliance problem into a strategic problem. Companies that treat this as a distant possibility are betting their cost structure on congressional dysfunction and presidential restraint.
That's not a bet we'd take.
The prudent move is straightforward: map your exposure, stress-test your margins, and start qualifying alternatives. Even if the 500% tariff never lands, the exercise makes your supply chain more resilient. And that's value regardless of what Congress does this week.
For help assessing your supply chain compliance exposure or structuring tariff risk provisions in your contracts, reach out to our team.