Economics now the Trump card in the US’s global skirmishes
Sanctions, embargoes and blacklists for businesspeople have become the president’s weapon of choice in getting what he wants
Call it the new US way of war. Forget aircraft carriers, stealth fighters and cruise missiles. Think instead about dollars, silicon chips, digital data and sanctions, embargoes and blacklists.
Nations have often employed economic coercion. Donald Trump has gone three steps further. He has merged US economic policy with its national security strategy.
When treasury secretary Steven Mnuchin was asked if the US could halt Turkey’s onslaught against the Kurds in Northern Syria, he had an easy answer. “We can shut down the Turkish economy.”
Mnuchin, a former banker and hedge fund investor, was once what the president calls a “globalist”. Now, it seems, part of his job is to roll back the frontiers of globalisation.
Perhaps nothing about Trump’s presidency should surprise us. After all, a couple of days before he slapped sanctions on Ankara, he had all but blessed President Recep Tayyip Erdogan’s invasion by announcing the withdrawal of the US troops who fought alongside the Kurds against Islamic State.
Trump says that by pulling out he is redeeming an election pledge to bring home US troops from the Middle East. And, after Iraq and Afghanistan, something is to be said for his reluctance to Trump put US’troops s peremptory in harm’s dismissal way. of John Bolton as national security adviser may well have averted a war with Iran.
Throwing the Kurds overboard is a different story. The president has handed — strategic victories to Russia, Syria and Iran simultaneously, while damaging US regional credibility. The Kurds were vital partners in the defeat of the jihadis. By betraying them,
Trump shows the US to be a wholly unreliable ally — as capricious in dealing with friends as with enemies.
Trump is not the first president to weaponise US economic might. In 1956, Dwight Eisenhower’s administration forced Britain to withdraw from Suez by blocking international support for sterling. Ronald Reagan and Margaret Thatcher were famously firm allies, but had a protracted fight about the extraterritorial reach of US sanctions on the Soviet Union after the invasion of Afghanistan.
Throughout the Cold War, most Western nations restricted the export of sensitive technology to the Soviet Union. More recently, the EU imposed its own sanctions on Moscow, alongside those of the US, after the annexation of Crimea and occupation of eastern Ukraine.
Now, tariffs, embargoes and the like have become the US remedy for all seasons. The dollar’s role as the sole reserve currency gives the US a unique capacity to control the international financial system.
The tariffs imposed on Chinese, Canadian and Mexican goods at the start of Trump’s presidency had the limited aim of tilting bilateral trade accounts back towards balance. Since then myriad restrictions on China signal a more fundamental goal of decoupling the economies.
Apart from Huawei’s troubles, the 2018 Foreign Investment Risk Review Modernisation Act caps investment in Silicon Valley by Chinese businesses. The Denied Persons List imposes draconian curbs on technology transfer.
Trump reaches for the sanctions manual whenever the mood takes him. The latest set supposedly provide a response to the repression of the Uighur population in China’s Xinjiang province. The US president has invoked Cold War legislation passed by the Kennedy administration to declare imports to the US of European and Canadian cars and flows of immigrants across the Mexican border as national security threats demanding retaliation.
During Barack Obama’s presidency, sanctions on Iran helped persuade it to reach a deal with the international community on its nuclear programme. Trump disowned that accord, only to apply even tougher measures. The purpose now reaches well beyond nuclear ambitions to include Iran’s behaviour in the region.
Where the US goes, Trump expects its allies to follow. By denying Iran access to dollars, Washington has all but broken the back of European efforts to salvage the nuclear accord. Not content with pushing Huawei out of the US market, the administration demands that European allies exclude it from their 5G digital networks. The allies were threatened with loss of access to US intelligence.
Much of the time there is no need to apply direct pressure to achieve such extraterritorial effect. Western companies operate within complex, crossborder supply chains. Many have operations or sales in the US. They cannot risk coming on a US black list or at risk of losing access to dollars.
The White House is unapologetic. Peter Navarro, the president’s trade adviser, says economic security is indivisible from national security. Another way of putting it is for as long as the US holds the only reserve currency and preponderant economic power, the US does as it pleases. In Trump’s world, rules are for the weak.
THE KURDS WERE VITAL PARTNERS IN THE DEFEAT OF THE JIHADIS. BETRAYING THEM SHOWS THE US TO BE A WHOLLY UNRELIABLE ALLY
THE DOLLAR’S ROLE AS THE SOLE RESERVE CURRENCY GIVES THE US UNIQUE CAPACITY TO CONTROL THE INTERNATIONAL FINANCIAL SYSTEM