The paper explores the potential impact of the European Union implementing tariff sanctions on Russia similar to those recently imposed by the United States. It addresses whether “mirror” sanctions, such as imposing a 35% tariff on 570 product groups, would effectively harm the Russian economy while minimizing economic costs to the EU. The analysis aims to quantify the economic effects of such sanctions at both aggregate and sectoral levels.
To answer this, the authors employ a sector-specific partial equilibrium model to simulate trade flow obstruction, terms-of-trade impacts, and welfare losses for both Russia and the EU. The model incorporates pre-sanction trade data, elasticity estimates, and the specific product groups targeted by the US sanctions, allowing the authors to extrapolate the potential outcomes of the EU adopting a similar approach.
The results indicate that EU mirror sanctions could significantly harm the Russian economy, with estimated annual welfare losses of at least $996 million. This effect would be nearly four times greater than the impact of US sanctions alone, due to the stronger trade ties between Russia and the EU. However, the sanctions would also impose costs on the EU, with $150 million in annual welfare losses for its economy. Notably, the analysis reveals significant variation across sectors: some targeted product groups result in substantial welfare losses for Russia while generating welfare gains for the EU, whereas others disproportionately harm the EU economy. Additionally, sectors where trade would be entirely blocked show mixed outcomes, as such measures reduce EU reliance on Russian imports but at considerable economic cost.
The policy implications suggest that while coordination among allies strengthens the effectiveness of sanctions, the EU should carefully tailor its measures rather than simply replicating the US approach. By selecting sectors that maximize harm to Russia while minimizing self-harm, the EU can create a more efficient sanctions package. Moreover, aligning sanctions with broader strategic goals, such as reducing dependency on Russian imports, could enhance their long-term effectiveness. A nuanced approach is essential to ensure the EU’s economic resilience while maintaining pressure on Russia.
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