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The Greatness Agenda

Trump’s Economic Warfare

Many mainstream economists oppose economic sanctions, saying either they don’t work or they violate the global system of free trade. They are wrong on both counts.

 


- September 9th, 2019
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Economic warfare is defined as “the use of, or the threat to use, economic means against a country in order to weaken its economy and thereby reduce its political and military power.”

Such nonmilitary, yet essentially warlike activity includes the use of economic means to compel a given adversary to alter its policies or behavior or to undermine its ability to conduct normal relations with other countries.

These economic means stop short of outright and overt physical engagement or battle, but they seek remedies and have real, measurable consequences; some of those measures today take an electronic or digital form in the case of crypto war.  

Common forms of economic warfare include trade embargoes, boycotts, sanctions, tariff discrimination, the freezing of capital assets, suspension of aid, the prohibition of investment and other capital flows, and expropriation.

Trump has used all of them, and more often than past presidents; they have come to define both his own image and his very foreign strategy.

Of course, countries engaging in economic warfare want to weaken an adversary’s economy by denying the adversary access to necessary physical, financial, and technological resources or by otherwise harming its ability to benefit from trade, financial, and technological exchanges with other countries. 

The United States is no different and Trump and his “America First” team have become wizards of these kinds of action. 

Trump doesn’t want to shoot America or Americans in the foot. But as he has shown repeatedly—in Syria, Iran, Venezuela, North Korea, Cuba, China, Russia, and vis-a-vis the European Union—he means business.

Trump has used all of these measures to bring about shifts in policy and to get a country, party, or a person to the negotiating table or to impose a degree of harm—short of military engagement—so as to protect or defend U.S. national interests.

Economic warfare is now more or less synonymous with Trump’s foreign policy as a tool, a stick as it were, and occasionally as a carrot to induce desired behaviors.

How is it working?

According to Foreign Policy, “a year into his presidency, President Donald Trump has become an aggressive practitioner of economic sanctions. So far, the Treasury Department has added over 700 people, companies, and government agencies to sanctions lists.” They claim this is unsustainable. 

The Financial Times of London goes further and castigates Trump for using too many sanctions, too loosely, thereby “hurting world trade.” The left-wing Guardian goes further still, saying, “Since taking office last year, Trump has repeatedly resorted to draconian economic sanctions and trade tariffs, launching them like missiles at countries and people he does not approve of. Trump did not invent the practice, but it has become his foreign policy weapon of choice.”

But according to the brilliant international legal expert Ingrid Detter de Frankopan, in her opus, The Law of War, “the reaction of international society to a breach of international law is often that of imposing sanctions on an offending State.” She goes on to say that “one of the most common forms of sanctions during conflict has been a declaration on trade or, more pertinently, on the purchase of weapons.” 

In other words, embargoes are an important and forceful type of economic sanction and Trump is right to use them. So, too, are tariffs, sanctions, and prohibitions.

Trump is proving they can and do work.

Yet many mainstream economists oppose economic sanctions or related measures saying they don’t work, or they violate the global system of free trade.

They are wrong.

Economic sanctions are an attractive political tool for the U.S. government to take to express dissatisfaction even if they don’t always totally achieve the change envisaged. They are greatly preferred to military intervention. 

Generals and admirals don’t always understand or comprehend economic warfare because they know little about the economy or business, and therefore too often decry or downplay those options.

First, economic warfare does not always prevent armed conflict. It can escalate, if not used appropriately and effectively; if employed willy nilly.

It could be said that the higher the level of ambition the harder it is to achieve the impact, when it comes to economic warfare. 

Here are a few general rules on economic warfare that Trump seems to be learning and teaching the rest of the world.

1)  Use them on a short-term basis, not as a long-term solution.

2) Take full measures that bite seriously, not lame half-measures. Maximize pressure.

3) Get as much international and diplomatic support as possible. 

4) Realize that practice differs radically from the theory.

5) Because of increased international interdependence and global supply chains, know that some means are less likely to work or more difficult to ensure.

6) Given the variety of sourcing and mobility of capital any sanctions need to be tight and duly enforced.

7)  It all comes down to teeth. Monitor and enforce.

Trump knows that economic measures as a form of warfare are powerful foreign policy instruments. They are not merely economic tools. They also have domestic political consumption that should not be discounted. Trump uses them in a fashion that supports his political base and aims.

Trump doesn’t want to shoot America or Americans in the foot. But as he has shown repeatedly—in Syria, Iran, Venezuela, North Korea, Cuba, China, Russia, and vis-a-vis the European Union—he means business.

Trump, in effect, is becoming the master of economic warfare.

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