Trade Sanctions

We review the economics of trade sanctions and provide new macro and micro evidence with the Russia 2014 and 2022 episodes as central case studies. On the macro side, we calibrate a multi-country, multi-sector general-equilibrium trade model with input–output linkages to quantify welfare effects under alternative coalition and intensity scenarios. Relative to 2014, the 2022 measures imposed substantially larger costs on Russia (about –2.6% of real income) while the average cost for EU/UK senders remained modest (around –0.1%), with larger losses in highly exposed small economies. Coalitions amplify pressure on the target at limited additional cost for most senders; hypothetical extensions bound sanctions potential (e.g., global participation or embargoes). On the micro side, using French customs data (monthly firm–product–destination flows, 2021–2023) and a triple-difference design, we show that exports to Russia fell by roughly three quarters after February 2022. The adjustment is dominated by the extensive margin, with smaller but significant intensive-margin declines among continuing firms. Targeted products contracted far more than non-targeted ones (dual-use goods most severely), and we document diversion consistent with rerouting to nearby non-sanctioning countries. We further discuss financial channels that propagate losses beyond listed goods, limits of ``smart'' sanctions when governments shield strategic firms, and political responses—including rally-around-the-flag effects.