Sanctions, Trade, and Growth: Empirical Analysis

Abstract: This paper investigates the macroeconomic consequences of United States’ and European Union’s sanctions on major targeted economies, focusing on China and Russia over the period 2010–2023. While sanctions have become an increasingly prominent tool of geopolitical strategy, empirical evidence on their contemporary economic effects remains limited. Using a harmonized country-year panel dataset and an original sanction-intensity index capturing trade, financial, sectoral, and technology restrictions, the study employs multiple complementary identification strategies—descriptive contrasts, staggered Difference-in-Differences estimators, dynamic event-study models, and dose–response regressions—to isolate the impact of sanctions on trade openness, trade values, and GDP growth. The findings indicate that sanctions significantly reduce trade-to-GDP ratios and slow economic growth in sanctioned countries, with heterogeneous magnitudes: Russia experiences large and persistent declines, while China shows moderate but measurable contraction, reflecting differences in trade structure and adaptability. The United States, as a sanctioning rather than sanctioned economy, displays negligible macroeconomic exposure. Dose–response estimates reveal a convex relationship in which higher sanction intensity yields disproportionately larger economic losses, particularly for Russia. The study contributes to the sanctions literature by integrating modern causal methods with a comparative framework and by highlighting the nonlinear and asymmetric nature of sanction effects. Policy implications underscore the importance of targeted design, enforcement credibility, and the need for sanctioned economies to pursue diversification, technological self-reliance, and financial resilience. The paper concludes with directions for future research on micro-level adjustment, global spillovers, and advanced identification strategies.