Since June 2025, when the United States announced a framework agreement with China, the global economy has entered a new phase, according to an analysis published in Foreign Affairs. Authored by Henry Farrell, professor of international affairs at Johns Hopkins University, and Abraham Newman, a professor at Georgetown University’s School of Government, the piece argues that great-power competition is no longer confined to military influence. Instead, economic tools—ranging from supply chains to technological systems—have evolved into instruments of geopolitical leverage. This emerging era is termed “weaponized interdependence,” where economic connectivity itself is repurposed as a means of coercion.
For decades, the U.S. has led in deploying economic instruments such as sanctions, technology restrictions, and financial networks to assert its will. However, the balance of power is shifting. Recently, the Trump administration was compelled to make concessions on semiconductor policies in exchange for China easing export limits on rare earth minerals—critical inputs for American industries. Washington now faces the same vulnerabilities it once exploited: chokepoints in advanced technology and supply chains. Meanwhile, China has developed its own countermeasures, leveraging export control laws and dominance in rare earth markets to exert pressure on Western economies.
China’s strategic pivot began in 2013, following Edward Snowden’s revelations about U.S. digital espionage. The subsequent American bans on Huawei and ZTE reinforced Beijing’s resolve to decouple from Western technology. It launched a comprehensive strategy to overcome technological bottlenecks and enacted legislation mirroring U.S. practices, enabling export restrictions for national security purposes. By 2024, Beijing had deployed these tools to pressure Europe and the United States. Companies like Mercedes and BMW sounded alarms over shortages of essential magnets, prompting urgent political responses. In this way, economic weapons are now rebounding on their original wielders.
Europe, despite possessing strong geo-economic assets such as SWIFT and strategic tech firms, lacks an integrated institutional framework linking trade and national security. While European officials speak of countering economic coercion, mechanisms like the Anti-Coercion Instrument remain stalled due to legal and bureaucratic hurdles. The 2021 Lithuanian case—when China imposed economic penalties after Vilnius took a stance on Taiwan—revealed deep divisions within the EU. German businesses lobbied against confrontation, prioritizing commercial interests over political solidarity. As a result, Europe remains hesitant, caught between Washington and Beijing.
In the U.S., internal fragmentation and poor governance are undermining the effectiveness of economic statecraft. The Trump administration reduced staffing at key agencies like the Office of Foreign Assets Control (OFAC), eliminated funding for economic security policy analysis, and halved the National Security Council’s personnel. These cuts led to ad hoc and uncoordinated decisions. In energy, Washington abandoned leadership in clean technology in favor of fossil fuels, ceding ground to China in future-oriented sectors. Even in digital currencies, the lifting of sanctions on platforms accused of money laundering has eroded confidence in the U.S. financial system.
The so-called “American stack”—the integrated network of corporations, technologies, and financial institutions—once served as a magnet for global partners, despite its risks. But as this system becomes increasingly weaponized, even allies are seeking alternatives. China is building independent digital payment networks, Europe is developing its own infrastructure, and trust in U.S. reliability is waning. As former Canadian Prime Minister Mark Carney put it: “The United States has begun selling its dominance as a commodity.”
The analysis concludes that for America to maintain its position, it must restore institutional balance. Just as strategic institutions were built to manage nuclear deterrence, a flexible bureaucratic apparatus is now needed to navigate weaponized interdependence. This requires reinvesting in analytical agencies, establishing clear legal frameworks for economic tools, and collaborating with allies through transparent systems rather than coercion. The world no longer accepts unchecked U.S. dominance. If Washington ignores this shift, its economic leverage could become a strategic liability, eroding what remains of its global influence.
The current reality is clear: economic interdependence no longer guarantees peace—it has become a battleground. Every network, from the internet to mineral supply chains, is now potentially militarized. The critical question is whether Washington will recalibrate and build a more balanced order, or persist in unilateralism and lose control. The answer, the analysis suggests, may arrive sooner than expected.
— news from al-ain.com