Has America Started a Global Economic Arms Race?

About This Episode

The US has spent decades using economic sanctions and export controls to pressure its adversaries. Now China, Iran, and even the European Union are adopting similar tactics. Georgetown University professor Abraham Newman joins Deep Dish host Leslie Vinjamuri to explain why countries are in an “arms race to collect the chokepoints” of the global economy, how America's economic weapons could backfire, and why this growing competition could leave everyone less secure and more vulnerable. 

Key Takeaways

• Due to weaponized interdependence, the use of centralized global financial networks as chokepoints for coercion, states have new ways to undermine, monitor or attack their adversaries.
• Newman contends that the use of these financial coercion tools became more prevalent post 9/11. President George W. Bush used these tools against terrorist organizations, and each subsequent president has used economic coercion more frequently against foreign opposition.
• Newman argues that this system of weaponized interdependence has created new, more dangerous versions of economic coercion tools, but rather than using them strategically, their use has been shortsighted.
• The Trump administration decision to withdraw from the JCPOA in 2018, that was the first “wake-up call” for powerful state actors that the international financial system can also be used to harm them.
• Newman believes that China’s restriction of rare earth minerals was a direct reciprocal response to the United States targeting of their technology sector, replicating the United States strategy that they had previously not utilized.
• The use of economic coercion by Europe in the Russia-Ukraine War was very reactive, leading some to question the methods used, and how it undermines the legal economic order and could create a dangerous precedent.