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The exercise of US foreign policy (along with the European Union and the United Nations) has been increasingly characterized by the use (or threat) of trade sanctions. What do we know about how such sanctions work? Gabriel Felbermayr, T. Clifton Morgan, Constantinos Syropoulos, and Yoto V. Yotov review the evidence in “Economic Sanctions: Stylized Facts and Quantitative Evidence” (Annual Review of Economics, 2025, 17: 175-195). They write:

According to the newest version of the Global Sanctions Data Base (GSDB; Yalcin et al. 2024), the number of sanction programs in place globally has shot up from about 200 10 years ago to about 600 in 2023. What is more, about 12% of all existing country pairs and 27% of world trade are currently affected by some type of sanction. In their various forms, sanctions are the leading geoeconomic tool aiming to coerce foreign governments into actions that they would not undertake otherwise. …

[S]anction processes are much better understood today than they were 30 years ago. The political science community has come to accept what economists already knew (i.e., that sanctions bring substantial economic effects), and economists have come to accept what political scientists have long understood (i.e., that substantial economic costs do not always bring changes in policy). Over that same period of time, the use of sanctions has dramatically increased, and they have come to affect many more bilateral economic relationships. This is a puzzling phenomenon: If sanctions are costly and frequently fail to deliver the desired policy objectives, why have they become so endemic?

Their discuss of this question offers various hypotheses about bargaining and negotiating. But I found one of the insights especially persuasive: “[T]he primary effects on [sanction] targets are negative, large, often long-lasting, and very heterogeneous; in contrast, the corresponding effects on senders tend to be small and short-lived.” In other words, sanctions have at least a chance of producing substantial pain, at little cost to those doing the sanctioning.

For more details, I useful starting point is a two-paper symposium on “Trade Sanctions and International Relations” in the Winter 2023 issue of the Journal of Economic Perspectives (where I work as Managing Editor):

• “Economic Sanctions: Evolution, Consequences, and Challenges,” by T. Clifton Morgan, Constantinos Syropoulos, and Yoto V. Yotov
• “Financial Sanctions, SWIFT, and the Architecture of the International Payment System,” by Marco Cipriani, Linda S. Goldberg, and Gabriele La Spada

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