Economic sanctions are a common policy tool used by states against one another. They are imposed to pressure target countries to change their behavior on issues ranging from human rights and nuclear proliferation to trade and territorial aggression. Yet, they have a low rate of success, depending on how one counts, and the literature suggests that they may even cause unforeseen harms for the sanctioning country’s own population.

Striking the right balance between imposing pressure on a targeted government while avoiding plunging that nation into a humanitarian crisis requires a nuanced understanding of a target’s economic structure, trade relationships, and social fabric. This delicate dance also requires a firm grasp of the extent to which a target’s people are dependent on the state for essential goods and services. In the case of Venezuela, US sanctions have exacerbated the shortages of food and medicines, decreased infant mortality, and diminished life expectancy, and have also contributed to civil strife and political instability.

In this article, we use a new dataset and approach to measure the impact of sanctions on bilateral trade, and we find that in general sanctions reduce bilateral exports, and they do so primarily by increasing transaction costs and by reducing a sender’s access to international capital markets. The results suggest that, even if they do not change the desired target behavior, economic sanctions are important tools to signal the costs that other states must bear for violating norms a sanctioning power cares about.