In and out of the penalty box: U.S. sanctions and their effects on international trade

Does lifting sanctions cause trade to rebound? If so, how long does such a restoration take? We answer these questions for the United States, the world's most active imposer of economic sanctions, with detailed product-level data on U.S. imports, exports, and sanctions. We find that U.S. imposed trade sanctions have a short-term, negative effect on U.S. imports from and exports to targets relative to non-targets of 30-40 per cent. Financial sanctions decrease U.S. imports by 35 per cent. There is no evidence of a rebound effect. Instead, imports from former targets continue to decline by up to 70 per cent relative to non-targets up to 4 years after a trade imposition has been lifted. We also find that a non-trivial 7-14 percent of U.S. exports is deflected to targets’ geographic neighbors during trade sanctions, pointing to exporters’ agility in reorganizing regional supply chains and/or “sanctions busting” behavior.