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A theory of economic sanctions as terms-of-trade manipulation

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  • Becko, John Sturm

Abstract

How can a country design economic sanctions to maximize their economic cost to the sanctioned country at the lowest cost to the sanctioner? I consider this problem from the perspective of international trade and draw a close connection between trade restrictions as economic sanctions and trade restrictions as terms-of-trade manipulation. This connection has useful implications for the design of trade taxes as sanctions: Small sanctions increase welfare in the sanctioning country. Sanctions target the same goods as terms-of-trade manipulation. Sanctions ignore elasticities of demand and supply in the sanctioning country.

Suggested Citation

  • Becko, John Sturm, 2024. "A theory of economic sanctions as terms-of-trade manipulation," Journal of International Economics, Elsevier, vol. 150(C).
    • Handle: RePEc:eee:inecon:v:150:y:2024:i:c:s0022199624000229
    DOI: 10.1016/j.jinteco.2024.103898
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    Cited by:

    1. Konstantin Egorov & Vasily Korovkin & Alexey Makarin & Dzhamilya Nigmatulina, 2025. "Trade Sanctions," Working Papers 1516, Barcelona School of Economics.
    2. Konstantin Egorov & Vasily Korovkin & Alexey Makarin & Dzhamilya Nigmatulina, 2025. "Trade Sanctions," CESifo Working Paper Series 12341, CESifo.
      • Konstantin Egorov & Vasily Korovkin & Alexey Makarin & Dzhamilya Nigmatulina, 2025. "Trade sanctions," Economics Working Papers 1920, Department of Economics and Business, Universitat Pompeu Fabra.
      • Egorov, Konstantin & Korovkin, Vasily & Makarin, Alexey & Nigmatulina, Dzhamilya, 2025. "Trade sanctions," BOFIT Discussion Papers 11/2025, Bank of Finland Institute for Emerging Economies (BOFIT).
    3. Nam T. Vu & Kiet Tuan Duong & Luu Duc Toan Huynh, 2025. "Tax Incentives under Sanctions: Evidence from Russian Tax Authorities," Working Papers 121, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research.
    4. Ryan Chahrour & Rosen Valchev, 2024. "The Dollar in an Era of International Retrenchment," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 72(3), pages 1042-1080, September.
    5. Bondarenko, Yevheniia & Lewis, Vivien & Rottner, Matthias & Schüler, Yves, 2024. "Geopolitical risk perceptions," Journal of International Economics, Elsevier, vol. 152(C).
    6. Lewis, Vivien & Puangjit, Sirikorn, 2025. "A simple model of geopolitical risk and sanctions," Discussion Papers 32/2025, Deutsche Bundesbank.
    7. Turner, Douglas C. & Sappington, David E.M., 2024. "On the design of price caps as sanctions," International Journal of Industrial Organization, Elsevier, vol. 97(C).
    8. Gao, Shanshan & Song, Zhouying, 2025. "Trade frictions on China's photovoltaic trade and their reshaping effects," Renewable Energy, Elsevier, vol. 244(C).
    9. Aytun, Uğur & Hinz, Julian & Özgüzel, Cem, 2025. "Shooting down trade: Firm-level effects of embargoes," Journal of Economic Behavior & Organization, Elsevier, vol. 231(C).
    10. Ghironi, Fabio & Kim, Daisoon & Ozhan, Galip Kemal, 2025. "International trade and macroeconomic dynamics with sanctions," Journal of Monetary Economics, Elsevier, vol. 154(C).

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    Keywords

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    JEL classification:

    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

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