In the 21st century, the United States has increasingly relied on economic instruments to advance its foreign policy objectives. Measures such as tariffs and sanctions have been deployed to influence adversarial nations, notably in the cases of China during the trade conflict and Russia following its invasion of Ukraine. The intent behind these actions was to protect national interests and shape international behavior without direct military engagement. However, the consequences have proven more complex than initially anticipated, affecting global markets, alliances, and the broader international system.
In 2022, the U.S. and allied nations introduced sweeping sanctions on Russia after its military incursion into Ukraine. These included cutting off key Russian banks from the global financial network, restricting energy firms, and freezing the assets of wealthy elites. The goal was to weaken President Vladimir Putin’s ability to sustain the war effort and compel a strategic shift. While Russia’s GDP contracted sharply at first, the country demonstrated resilience by redirecting oil exports to markets such as China and India. The ruble, despite fluctuations, avoided total collapse.
Nonetheless, long-term damage has been significant. Russia now faces restricted access to advanced technologies and Western capital, increasing its dependence on Beijing. Its energy sector, once a pillar of global influence, is selling resources at reduced prices to maintain revenue. Meanwhile, Europe faced an energy crisis due to its prior reliance on Russian gas, leading to soaring prices. Developing economies also experienced heightened inflation, particularly in food and fuel, illustrating how targeted sanctions can have widespread ripple effects.
The diplomatic impact has been equally notable. Rather than isolating Moscow, the sanctions have reinforced its narrative of Western hostility, strengthening domestic unity and deepening ties with non-Western partners. Many nations in the Global South perceive the sanctions regime as evidence of a fragmented world order where rules are applied selectively.
The tariffs imposed on China beginning in 2018 stemmed from economic competition rather than armed conflict. Washington cited unfair trade practices, intellectual property concerns, and a growing trade imbalance as justification for levying duties on Chinese imports. The aim was to protect domestic industries and rebalance economic relations. In response, Beijing retaliated with tariffs on American agriculture and manufactured goods, escalating tensions.
Consumers and businesses in the U.S. faced higher costs, disrupted supply chains, and increased operational expenses. While China’s economy felt the strain, it also adapted by investing in self-reliance, expanding regional trade through the Regional Comprehensive Economic Partnership (RCEP), and reducing dependency on Western markets. The trade deficit with the U.S. did not substantially shrink.
The interdependence between the two economies became more apparent, with American farmers and manufacturers suffering from retaliatory measures. The tariffs may have accelerated a partial decoupling, prompting shifts in global supply chains toward reshoring and diversification. However, this transition has brought greater costs and uncertainty rather than clear strategic gains.
Both the sanctions on Russia and tariffs on China reflect a broader U.S. strategy of using economic leverage to achieve geopolitical goals. Yet they differ in nature: tariffs are competitive and transactional, while sanctions are punitive and exclusionary. Their combined effect has been to reshape global manufacturing and energy systems, respectively.
More importantly, these policies have prompted other nations to seek alternatives to U.S.-dominated financial and trade networks. China is promoting institutions like the Asian Infrastructure Investment Bank and expanding the use of the yuan in cross-border transactions. Even U.S. allies are diversifying their economic relationships to avoid entanglement in great-power disputes.
Over time, this trend risks eroding the liberal economic order the U.S. helped build. Instead of a unified global system, the world may be moving toward competing economic blocs, increasing costs and strategic uncertainty for businesses and governments alike.
The experience shows that economic coercion can impose real costs and signal resolve, but it is not a cure-all. Without complementary diplomacy, coalition-building, and long-term planning, such tools can alienate partners and strengthen adversaries. Washington must recognize the limits of its financial dominance—overuse of sanctions could accelerate the development of alternative systems, while tariffs cannot reverse decades of globalization overnight.
Ultimately, economic statecraft should be part of a broader strategy, not the strategy itself. To navigate an era of intensified great-power competition, the U.S. must apply its economic tools with greater precision, humility, and foresight. Otherwise, the very instruments designed to protect American influence may end up undermining it.
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The Double-Edged Sword of U.S. Economic Power
The United States has increasingly utilized its economic might as a tool of statecraft in the twenty-first century. Washington has employed tariffs, sanctions, and military force to influence the actions of its adversaries. Two of the most significant instances of this tactic are the tariffs placed on China during the trade war and the sanctions placed on Russia after it invaded Ukraine. n nThe goals of both actions were to safeguard American interests and exert influence overseas. However, the ramifications of their actions have been far more intricate than Washington policymakers may have expected. They have expedited the disintegration of the international order, tested relationships, and changed global markets. n nIn 2022, the United States and its allies imposed an unprecedented set of sanctions in response to Russian tanks rolling into Ukraine. Energy corporations were subject to restrictions, Russian banks were shut out of the global financial system, and the assets of oligarchs were frozen. The objective was clear: to put pressure on President Vladimir Putin to alter the path of the war and to make it harder for Moscow to finance it. n nThe sanctions have produced a range of economic outcomes. Although Russia’s GDP shrank precipitously in the immediate aftermath, the nation turned out to be more resilient than many had anticipated. Moscow was able to lessen the impact by shifting oil exports to China, India, and other ready consumers. n nDespite its volatility, the ruble did not completely collapse. But there is no denying the long-term harm. Russia has been compelled to rely on Beijing, denied access to cutting-edge technology, and shut out of Western financing markets. In order to preserve cash flow, its energy industry, which was formerly the foundation of its worldwide dominance, is now selling at a discount. The largest trading bloc in the world, the Regional Comprehensive Economic Partnership (RCEP), provided China with new ways to counteract American pressure. n nHowever, there have been notable global consequences. Europe’s severe reliance on Russian gas led to an energy crisis and a sharp increase in costs. Developing countries, already struggling with post-pandemic inflation, saw increases in the cost of food and petrol. The world was also affected by sanctions meant to punish Moscow, raising questions about whether the West had underestimated the collateral damage. n nRussia’s resolve has been diplomatically reinforced by sanctions. Instead, the Kremlin has stepped up its depiction of Western hostility. For many in the Global South, the sanctions regime has reinforced perceptions of a divided international order, where Western values are selectively implemented. n nTariffs on China were the result of rivalry, whereas sanctions on Russia were the result of conflict. Citing unfair trade practices, intellectual property theft, and a widening trade deficit, Washington levied broad duties on Chinese goods starting in 2018. The purpose of the tariffs was to safeguard American industries and restore economic equilibrium. The immediate result was a dramatic rise in hostilities between the United States and China. Beijing responded by imposing tariffs of its own on American manufacturing and agriculture. n nCustomers suffered at the checkout counter, supply networks were interrupted, and business expenses increased. Although the tariffs hindered China’s economy, they also encouraged adaptation. By making significant investments in domestic technology and extending commercial relations with ASEAN countries, Beijing strengthened its commitment to independence. n nChina now has additional ways to counteract pressure from the United States thanks to the Regional Comprehensive Economic Partnership (RCEP), the largest trading grouping in the world. The trade imbalance was not significantly reduced by the tariffs for the US. n nRather, they emphasized how closely the two economies are interdependent. Farmers that depended on Chinese markets suffered from retaliatory actions, while American businesses that relied on Chinese production had to pay more. n nAbove all, the tariffs possibly sped up the decoupling process. As Beijing and Washington started to reconsider their mutual dependence, global supply chains gradually changed. Reshoring and diversification helped some industries, but overall, the impact was increased costs and more unpredictability. n nBoth measures disrupted global markets, imposed costs on both allies and adversaries, and produced mixed results in terms of changing behavior. China has not fundamentally changed its industrial policies, and Russia has not withdrawn from Ukraine. Instead, both countries have adapted, finding ways to mitigate the pressure while strengthening ties with alternative partners. n nAt first glance, tariffs on China and sanctions on Russia may seem like different tools aimed at different problems; one targeted geopolitical aggression, the other economic competition. However, both measures reflect a broader U.S. strategy: using economic leverage to achieve political ends without resorting to military force. n nBut the distinctions are just as significant. Global manufacturing has changed as a result of tariffs on China, while global energy markets have changed as a result of sanctions on Russia. Tariffs are transactional and competitive, whereas sanctions are punitive and isolating. When taken as a whole, they demonstrate the flexibility—and constraints—of economic pressure. n nThe indirect effects of U.S. sanctions and tariffs on the global system may be more important than their direct effects on China or Russia. Washington has made it clear that political alignment is required to gain access to its markets and financial networks by weaponizing economic interdependence. n nThis has caused competitors to look for other options. While China is establishing alternative organizations like the Asian Infrastructure Investment Bank and encouraging the use of the yuan in international trade, Russia is becoming more and more dependent on China. To avoid getting caught in the crossfire of great-power conflict, even allies of the United States are hedging. n nAs a result, the liberal economic system that the US helped establish is gradually being undermined. We might be heading towards a fractured world of rival blocs rather than a single, cohesive global organization. This results in increased expenses and uncertainty for firms. Governments will have to make more difficult decisions between conflicting areas of power. n nThe lesson is not that tariffs and sanctions don’t work. They have the power to signal resolve, inflict actual costs, and influence rivals’ calculations. However, they are not panaceas. Economic coercion has the risk of turning into a blunt tool that emboldens adversaries and alienates allies in the absence of diplomacy, coalition building, and long-term planning. n nAdditionally, Washington needs to understand the boundaries of its power. Although the dollar still holds sway, excessive use of financial sanctions may hasten the development of substitutes. Tariffs might shield some industries, but they can’t undo decades of globalization in a single day. n nThe United States must ultimately find a balance between engagement and pressure. Instead of being the toolkit itself, sanctions and tariffs ought to be a component of a larger one. If not, the United States runs the risk of eroding the same framework of free markets and partnerships that has long served as the basis for its dominance. n nBoth the potential and the danger of economic statecraft are demonstrated by the tariffs on China and the sanctions on Russia. They show that without firing a shot, the United States can nevertheless influence world events. However, they also demonstrate that, similar to military might, economic might has unforeseen repercussions. n nWashington needs to use its economic powers more accurately, modestly, and strategically if it hopes to survive this new era of great-power competition. Otherwise, America itself could be harmed by the two-edged sword of tariffs and sanctions, not only its enemies.