Political influence and trade uncertainty: Evidence from sanction threats and impositions

This paper examines how uncertainty arising from sanction threats impacts international trade. By separately examining the threat stages of sanctions to the actual imposition of sanctions, we distinguish the impact of political uncertainty on trade from that of actual trade disruption. We find that US sanction threats significantly reduce US bilateral trade with target countries. The effect is larger when the target is a nondemocratic state and when sanctions are politically motivated.