The latest round of sanctions is intended to tighten the screws on Russia by targeting broad sections of its economy and financial markets. So far, the U.S. and Europe have limited those targets to influential government officials—so-called phase two sanctions.
The latest "phase three" sanctions target key specific sectors of Russia's economy from the defense industry to the banking sector. Those include an embargo on arms sales to Russia; a ban on exports of so-called dual-use goods such as computers or equipment that have both either civilian or military uses; and efforts designed to cut off Russian banks from European capital markets.
Read MoreRussia is already feeling sanctions pain
The moves announced Tuesday further increase the risk that Russia raises the stakes in its widening economic and trade war with the West.
And both the European and Russian economies can ill afford any trade slowdown.
With an economy roughly the size of Italy's, Russia will feel the pain more intensely. Existing sanctions have all but wiped out growth in gross domestic product this year; the latest round is expected to throw the Russian economy sharply into reverse.
Read More EU hits Russia with new military, financial sanctions
Europe's economy is barely moving ahead right now; GDP in the euro zone expanded just two-tenths of a percent in the latest three months, less than expected. Falling prices have stymied efforts to revive growth, so any loss of exports will hurt.
Still, even Europe's largest exporter, Germany, sent only 3.2 percent of its goods and services to Russia last year, accounting for just 1.2 percent of Germany's GDP, according to Capital Economics. Other euro zone countries may take a bigger hit to GDP, but the overall impact on growth could be relatively small.