What is an Embargo?

An embargo is a government-instituted prevention of exports to a certain country.

In the media world, an embargo is the release of information with the condition that it cannot be published or disseminated before a certain date. Companies often embargo press releases, meaning that they disseminate them to the media with the condition that the media not report the story until after a certain date.

How Does an Embargo Work?

Let's say Country A dislikes Country B's human rights policies. In order to coerce Country B to change its ways, Country A forbids its companies from selling widgets to Country B. Country B has a huge demand for widgets, and being 'cut off' from Country A's widgets could encourage Country B's citizens to demand that Country B's government change its ways.

In many cases, a group of countries will join an embargo so that a country like Country B can't just start buying widgets elsewhere. Sometimes countries will embargo all products with other countries.

The Magna Carta is one of the world's first and most famous embargoes. Another famous embargo is the one between the U.S. and Cuba, which has not received most American goods for 50 years.

Why Does an Embargo Matter?

Embargoes are political strategies. Economies are increasingly global, which makes them even more powerful when they involve countries that rely on imports for day-to-day needs.

Critics point out that a country's choice not to join the World Trade Organization (WTO) may effectively place an embargo on the goods and services of that country, because WTO members often trade only with each other or give preferential treatment to other WTO members.

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Paul Tracy
Paul Tracy

Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 3 million monthly readers.

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