A law doesn't even have to be passed to destroy an economy—just the rumor of it is enough.
April 15, 2026
Original Paper
Threat of Sanctions
SSRN · 6576048
The Takeaway
We think of sanctions as a physical 'off switch' for trade. But this study of Russia shows that two-thirds of the trade collapse was caused by things that were never actually sanctioned. Companies stopped trading simply because they were scared of future laws or potential reputational damage. This 'invisible sanction' effect means that the mere threat of a policy is twice as powerful as the policy itself. For regular people, this means global prices can skyrocket based on what a politician might do next month, rather than what they've actually done.
From the abstract
Does uncertainty created by the threat of sanctions affect trade above and beyond the sanctions actually imposed? While most restrictions on Russian imports were introduced immediately after the February 2022 invasion of Ukraine, sanctioning countries simultaneously pledged further escalation unless the conflict ended. In line with this threat, we estimate that the subsequent escalations were largely anticipated in advance, with trade flows declining many months before they actually became sanct