Have you ever taken an economics class? Listen up, because Assistant Professor Horajio is going to give you a lesson.
Let's say there's two people on an island. One is really good at purifying water, and the other is really good at hunting the pigs on the island. They could work separately, one having good water and no food while the other will have delicious meat but contaminated water. On the other hand, the guy with the water could trade with the guy with the meat. He would exchange meat for water, and both parties would have water and meat. This is an example of trading, and shows that trading is beneficial for both parties.
Now, lets say the meat guy wanted an unfair amount of water for his meat. Like, the water guy would give ALL of his water for a bite of meat. The guy selling water can refuse this deal and keep his water. When a trade comes up that is bad for one side, they can refuse. That is the beauty of capitalism.
That is a brief explanation of why trading is good.
Now, you talk about trade embargoes helping smaller population countries.
This is the dumbest thing I have heard all day.
An embargo is a RESTRICTION on trade. It is BAD FOR TRADE. We already established that trade is bad.
Here's an example of two countries trading.
Let's say that Mexico and Brazil want to trade. In one year, Mexico can produce either 150 units of coffee or 75 units of broccoli. In one year, Brazil can produce 200 units of either coffee or broccoli, but not both. In this case, Mexico is clearly behind in both coffee and broccoli. However, what can happen is that Mexico produces 150 units of coffee and Brazil makes 200 units of broccoli. They then trade and get more than they could've gotten individually. Normally, without trade, Mexico would have to give up 2 units of coffee for 1 unit of broccoli. As long as Mexico trades less than 2 units of coffee for 1 unit of broccoli, they are getting more broccoli than they could've made by themselves. Likewise, Brazil has to give up one unit of broccoli to get one unit of coffee. If they trade at a rate that is above 1 unit of broccoli for coffee, they will get more broccoli and coffee than if they did not trade. Therefore, any rate of exchange between 1 and 2 of coffee to broccoli will benefit both countries, since they get more materials than they could've made by themselves.
Keep in mind, an embargo would STOP THIS. They would not be able to trade and get more resources. Countries with smaller populations who trade with larger countries benefit from trade because trade is inherently good, not because of embargoes like you state.
Also, I hate to burst your bubble, but the Horde and Alliance aren't actually at war. Sure, that's what people say, but it's not true. No one permanently dies from this war. If you die from a person of the opposite faction, then you come back to life in 30 seconds. No territory is won or lost. No matter how many times you kill Garrosh or Sylvanas, Orgrimmar and Undercity will always be Horde cities. The "war" between Alliance and Horde isn't a war so much as it is a scrimmage between members of the same team. There's nothing at stake in this "war," so we might as well trade to better ourselves off.
Lastly, shut up about it never changing. Trolls could never be druids or warlocks before Cata. Horde could never be paladins before TBC. Heck, the entire continents of Eastern Kingdoms and Kalimdor had never been changed since beta in seven years before Cataclysm. Saying that it's been that way is a dumb argument. People said the same thing to abolitionists in the civil war about slavery. Trust me, it's not a sound argument.