An embargo is a government order that restricts commerce with a specified country or the exchange of specific goods. An embargo is usually created as a result of unfavorable political or economic circumstances between nations. It is designed to isolate a country and create difficulties for its governing body, forcing it to act on the issue that led to the embargo.

Key Takeaways

  • An embargo is a government order that restricts commerce with a specified country or the exchange of specific goods.
  • They are usually created as a result of unfavorable political or economic circumstances between nations.
  • Embargoes can have serious negative consequences on the affected nation's economy.
  • Decisions on trade embargoes and other economic sanctions are often based on mandates by the United Nations.

How an Embargo Works

An embargo is a powerful tool that can influence a nation, both economically and politically. The ability to easily trade goods all over the world is key to maximizing the economic prosperity of a country. When that is no longer possible, it can have serious negative consequences.

The decisions on trade embargoes and other economic sanctions made by the United States are often based on mandates by the United Nations (UN), an international organization formed in 1945 to increase political and economic cooperation. Allied countries frequently band together, making joint agreements to restrict trade with specific nations. This is often done to force humanitarian changes or reduce perceived threats to international peace.

Embargoes do not necessarily apply to all goods moving in and out of a country’s borders. Sometimes only certain items are embargoed, such as military equipment or oil. 

Types of Embargoes

There are several different types of embargoes. A trade embargo refers to banning exports or imports to or from one or more countries. These can then be narrowed down more specifically. For example, a strategic embargo prevents the exchange of military goods with a country, while an oil embargo prohibits only the trade of oil.

The term embargo is also used in the media industry. When information is released with an embargo, it means that it cannot be published or shared before a certain specified date. Companies often embargo press releases.

Requirements for Embargoes

The president of the United States possesses the authority to impose embargoes and other sanctions during times of war under the Trading With the Enemy Act.

Another act, the International Emergency Economic Powers Act, gives the president power to enact commerce restrictions during periods of national emergency.

In the United States, the Office of Foreign Assets Control, a division of the Department of the Treasury, administers economic trade embargoes. The office plays a central role in tracking down and freezing sources of funding for terrorist and drug-related organizations.

Examples of U.S. Trade Embargoes

The United States has imposed several long-running embargoes on other countries, including Cuba, North Korea, and Iran. In the 1980s, several countries, including the United States, imposed trade embargoes against South Africa in opposition to apartheid.

American embargoes and economic sanctions against some countries specifically exclude certain types of goods, such as arms or luxury goods, while allowing other forms of trade. In contrast, comprehensive embargoes are more punitive because they prohibit all trade with the country.

In the wake of the September 11 terrorist attacks in 2001, U.S. embargoes were increasingly directed against countries with known ties to terrorist organizations that pose a threat to national security. Lately, U.S. embargoes have become more widespread, paving the way for a series of trade wars.

President Donald Trump came into office pledging to make it easier for consumers to buy American products. He proceeded to slap import taxes on certain goods entering the country, leading some nations, such as China, to hit back with punitive measures of their own.

Several embargoes have targeted the United States in the past. In the 1970s, for example, the U.S. economy suffered from an oil embargo imposed by member nations of the Organization of the Petroleum Exporting Countries (OPEC). That particular embargo caused fuel shortages, rationing, and soaring gas prices.

Special Considerations

The ability of countries to trade globally is also impacted if they do not join the World Trade Organization (WTO), an international institution that oversees global trade rules between nations. WTO promotes and manages free trade for its members. As a result, members often only trade with each other.

The WTO currently has 164 members. Sixteen countries chose not to become members. They are Aruba, Curacao, Eritrea, Kiribati, Kosovo, Marshall Islands, Micronesia, Monaco, Nauru, North Korea, Palau, the Palestinian Territories, San Marino, Sint Maarten, Turkmenistan, and Tuvalu. (For related reading, see "How Economic Sanctions Work")