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President Joe Biden announced Friday that the United States, the European Union and the Group of Seven countries, will move to revoke “most favored nation” trade status for Russia because of its invasion of Ukraine.

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What is “most favored nation” and what does it mean for Russia and the U.S.?

Here’s what we know now about Biden’s plan and what most favored nation means.

What is going to happen?

President Biden will announce that the U.S. will strip most favored nation (MFN) status from Russia. When that happens, the U.S. will be able to impose tariffs on Russian imports, causing another blow to the country’s crippled economy.

What is the most favored nation clause?

The most favored nation clause applies to member countries in the World Trade Organization (WTO).

A country with the most favored nation status cannot be treated any less favorably than other countries within the WTO. In other words, if a country provides any privileges to one nation in a trade agreement, it must offer those privileges to all other MFN countries in the WTO.

Members of the WTO share MFN status, though some countries have different privileges because they are classified as developing economies. Cuba and North Korea do not have MFN status.

MFN does not govern free trade agreements where goods are traded between the participating countries only.

How does MFN benefit a country?

MFN benefits countries in several ways:

· It gives countries access to international markets.

· It lowers the cost of a country’s exports, meaning they are more competitive in the world market.

· It cuts down on red tape since tariffs on goods being imported are all the same.

How many members are there in the WTO?

There are 164 member countries in the organization.

The Associated Press contributed to this report.