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Are sanctions used as diversionary tools by state leaders? A dominant argument in the literature is that leaders tend to initiate military disputes in periods plagued by economic distress. Yet, we have little knowledge on whether this diversionary strategy extends to other hostile foreign policy decisions. I revisit the diversionary theory and adapt it to the use of economic sanctions in the United States, contending that the use of sanctions follows a similar diversionary logic. More precisely, I argue that legislative constraints on presidential responses to domestic economic problems push presidents to employ coercive economic measures to demonstrate competence and leadership. Using a novel dataset on U.S. sanctions initiated from 1989 to 2015, I run a series of count models. I find robust evidence that U.S. presidents use sanctions as diversionary instruments when unemployment levels are high and the president’s party power in Congress is weak. More importantly, I show that leaders opt for the least costly sanctions measures, ones that inflict little cost on the U.S. economy.