Vol. 1 (2026)

Cases and Insights

Trade Sanctions with no Trade: China’s Weaponization of Value Chains Against Lithuania

Published 2026-05-25

  • Michele Savini Zangrandi
    • ,
  • Michele Mancini

Michele Savini Zangrandi
Bank of Italy (Italy)

Michele Mancini
Bank of Italy (Italy)

Journal of Geoeconomics Cover

Abstract

In late 2021 Lithuania came under trade sanctions from China in a crescendo of tensions that culminated with allegations of a violation of China’s One China Principle. As the bilateral relationship is very small, China blocked all trade – direct and indirect – originating from Lithuania, weaponizing inbound value chains. In the aftermath, Lithuania’s direct exports to China dropped by nearly 70%, and indirect exports – embedded in third countries’ shipments and more difficult to control – by over 10%. Analysis of selected benchmarks suggests that the drop is unrelated to broader economic trends. Despite their economic impact, China’s sanctions have so far failed to change Lithuania’s course. This episode represents a significant escalation in the logic of weaponized interdependence and a demonstration of China’s evolving capacity to exploit it.

JEL classification: F13, F14, F51, F52, C67

Keywords

Economic coercion, trade sanctions, value-chain weaponization, weaponized interdependence, indirect exports, global value chains, Lithuania, China, Taiwan, European Union

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Author Biography

Michele Savini Zangrandi

Michele Savini Zangrandi is an economist in the Emerging Markets and World Trade Division of the International Relations and Economics Directorate of the Bank of Italy (Banca d'Italia).

Michele Mancini

Michele Mancini is Deputy Head of the Emerging Economies and World Trade Division at the Directorate General for Economics, Statistics and Research of the Bank of Italy. He previously worked as Senior Economist at the ECB.

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