Updated on April 3, 2024
Article byWallstreetmojo Team
Reviewed byDheeraj Vaidya, CFA, FRM

Embargo Meaning

An embargo is a political decision where one government restricts the trade of goods between two nations. The restriction lasts for a specified period. Restrictions either includes all types of goods and services or a particular commodity like oil. 

In history, it has been seen that several times an embargo has been imposed during wars to restrict one country from helping another.  This aid could be in the form of weapons and other accessories which could potentially prolong the war. 

Key Takeaways

  • An embargo is a prohibition on the movement of goods and services between one nation and another. It is usually brought out by specific political or economic issues.
  • The two primary kinds of restrictions include trade and strategy. The former creates economic pressure on the target country; the latter is done for political or diplomatic concerns.
  • It is seen as a moral way of showing disagreement with the target nation, and a decision for such prohibition is authorized by the United Nations (UN).
  • Some of the embargoed countries are Iran, Cuba, and Syria.

How Does an Embargo Work?


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An embargo is used as a tool by a nation to restrict free trade with another nation which is called the target country. Thus, it is a state of non-cooperation with the target country. The government imposes a ban on the export and import of consumer goodsConsumer GoodsConsumer goods are the products purchased by the buyers for consumption and not for resale. Also referred to as final products, examples of consumer goods include an Apple cellphone or a box of Oreo cookies. Consumer goods companies and the industry offer a vast range of products that heavily contribute to the global economy.read more (trade) or military supplies (strategic). 

The decision regarding its enforcement is usually made with the approval of a group of nations. This makes trade easier and maintains peace among nations.

Whenever a country intimidates world peace, the allies of the United Nations (UN) put an embargo on that target country. Through this procedure, the UN’s allies try to prevent actions that cause political and economic distress.

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Embargo Act

In 1803, France and Britain were at war. The US was a common ally and hence was neutral. However, the conflicting nations rebelled against the US. Britain invaded US merchant ships; the British navy started enticing the American merchant sellers. As a result, Jefferson imposed the embargo act in 1807. Unfortunately, Jefferson’s political decision backfired, US trade and economy and the economyEconomyAn economy comprises individuals, commercial entities, and the government involved in the production, distribution, exchange, and consumption of products and services in a society.read more took a massive hit. 

Under this act, Jefferson shut down the US ports to discourage foreign trades. All trades and exchanges with Britain and France were restricted. This was done to show United States’ moral disagreement towards the war. The President anticipated the support of Americans, but that was not the case. It all went downhill from there. 

The US exports went down from $108 million to $22 million; the ports became uncrowded with barren ships, and around 30,000 sailors became unemployed. American citizens were impacted economically and therefore opposed the act. In addition, many US traders adopted unethical practices. They smuggled commodities inside and outside the country. Early 1809, Congress reversed this political decision by abolishing the act.

Why is an Embargo Imposed?

Embargoes are mainly imposed on a country/state or group of countries/states. The objective of the restriction is to stop the target country’s activities. Especially activities that threaten world peace. This action is specifically undertaken to check unacceptable movements like terrorism.

For example, if a target country is related to terrorist organizations and isn’t taking any step to stop terror, the United Nations (UN) may impose a trade restriction. The objective is to pressure the target country and change its diplomatic stance.

Sometimes a restriction is imposed on news media to prevent the leaking of sensitive information jeopardizing national security.

Embargo Example

Cuba, Iran, and Syria are embargoed countries. Moving on to recent examples:

#1 – The US Arms Embargo on Nigeria

On July 29, 2021, Reuters claimed that the US government suspended the delivery of arms and ammunition to Nigeria. The consignment was worth $1 billion. This stance was cleared by the Senate Foreign Relations Committee and the House of Representatives Foreign Affairs Committee. The US lawmakers justified this decision as an initiative safeguarding human rights. 

Thus, Nigeria had to forgo agreed-upon weapons. The deal included twelve AH-1 Cobra attack helicopters, navigation systems, two thousand precision-guided munitions, and spare engines. Nigeria required these arms to defend itself. Nigeria is up against the Islamic State of West Africa Province, armed bandits of the northwest region, and Boko Haram’s jihadist group from the northeast. 


The types of embargos are as follows:

  • A trade or economic embargo restricts the import-export of various goods from the target nation for a specific duration.
  • A strategic embargo restricts the exchange of military weapons for ensuring world peace. Such restrictions can also be imposed on news for national security reasons.
  • An environmental prohibition is imposed to express a state’s disagreement with another state’s environmental policy or attitude toward animals.
  • Restrictions can be enforced to settle a territorial conflict between two nations.
  • Some restrictions are executed to prevent health hazards. This happens when the target country’s actions affect another country.
  • Restrictions could be on a specific commodity like oil, or on events like sports.


When a nation imposes a prohibition of import and export, it affects the commodity’s price inside the target nation. It sometimes results in doubling or tripling of prices. The price hike is brought out by a shortage of supply. All in all a trade restriction puts tremendous pressure on the citizens of the target country. 

These restrictions severely affect the GDPGDPGDP or Gross Domestic Product refers to the monetary measurement of the overall market value of the final output produced within a country over a period.read more of both nations. Both face an economic downturn. The companies directly engaged in the trade of particular commodities are the worst affected. They risk going out of business.

But not all restrictions put pressure on the target country. The same goods or services can be imported or exported from or to other nations. At the opposite end of the spectrum, an established country can successfully harm a weaker target nation using such a prohibition.

Frequently Asked Questions (FAQs)

What is an embargo?

An embargo is a strategic decision of a nation. One nation decides to stop trading goods or services with another. This restriction is applicable for a specific period. Most trade restrictions are caused by political or economic issues.

What is the purpose of an embargo?

The primary objective behind such a restriction is to pressurize the target country during an economic or political problem. Most restrictions involve the supply of arms, ammunition, or supporting terrorist activities. Restrictions can also be caused by clashing environmental policies and health hazards faced by a country.

Why was the Embargo Act a failure?

With US President Thomas Jefferson’s declared neutrality during the warfare between Britain and France, the trade prohibition backfired. US trade and economy took a massive hit. As an act of rebellion, American traders started smuggling goods in and out of the nation. As a result, there was a sharp fall in exports, thousands of sailors lost their jobs, and the act was openly violated.

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