US-Cuba Trade Relations: The Effects of the Embargo

The US-Cuba trade embargo the US imposed in the early 1960s was a result of differing economic/political ideologies as well as tension during the Cold War era. Specifically, Cuba's increased trade with the Soviet Union in addition to a tax increase on US imports led President Kennedy enact a full economic embargo after prior restrictions were deemed insufficient. While, as of late, economic restrictions are becoming less and less stringent, it is unlikely that the embargo will be fully lifted anytime soon. 

A full trade embargo enactment undoubtedly impacts several major categories associated with economic position and development. In terms of imports and exports, there would certainly be a reduction to these aspects in terms of quantity, as there are less goods being traded both ways between the two countries. One foreseeable positive to the reduction of imports and exports would be if the country that enacted the embargo could then find the same goods in another country for cheaper (this is likely because, like in the case of the US and Cuba, the taxes on imports are exorbitant any way), or there always exists the option of producing the goods domestically, thus increasing GDP. Assuming an equally symbiotic trading relationship, net exports would remain relatively unchanged as a result of an embargo. However, if one country was just exporting to the other without a real trade balance, the country doing the exporting's net exports value would fall as exports fall. Net capital outflow would also be affected in a similar way to the effect seen on net exports, after all, the two values are equal to each other. Because trade is not permitted, the purchase of foreign assets would also be stopped, therefore net capital outflows would decrease. The final aspect to entertain is economic growth. This is an interesting one because it can vary greatly depending on factors such as size of the countries, existing state of the economies, importance of goods being traded, etc. For instance, if a large country is trading with a small country, and the large country imposes an embargo, it will affect the economic growth and development of the small country much more intensely than the large one. This is because the small country likely depends on the bigger country for resources, and the lack of these resources can cause a slowing of productivity. On the other hand, a large country with a solid economy can afford to not trade with a small country whose exports have far less impact on the state of the economy. This can be seen in the example of the US and Cuba as Cuba's economy has grown dramatically since the weakening of some of the economic restrictions and trade between the two has increased.

In conclusion, while some trade embargoes are necessary as a means of restricting contact with a country due to political and economic differences, the long term effects on the economy must be explored in depth as they can also serve as hindrances to economic growth as well as the overall state of the economy.