With David S. Cohen, Dr. Gary M. Shiffman, Daleep Singh, and Adam Szubin
This report has also been adapted as a brief pamphlet.
- Coercive economic measures, such as sanctions, investment restrictions, trade controls, and tariffs, have become an increasingly important tool of U.S. foreign policy in recent years.
- Recent years have witnessed a strengthening of U.S. coercive economic measures, which are likely to remain powerful in the near and medium term.
- Over the longer term, purely commercial factors are likely to support continued U.S. coercive economic power. However, choices by both U.S. policymakers and foreign governments will be the primary determinant of whether coercive economic measures remain powerful tools of U.S. foreign policy over the longer term.
- Shifts in the nature of U.S. coercive economic power could prompt some shifts in the balance and nature of the type of coercive economic measures the United States deploys.
Coercive economic measures have been a longstanding tool of American foreign policy, dating back to the early 19th century. But since the end of the Cold War, coercive economic measures have become an ever more important instrument of U.S. foreign policy. That trend is likely to continue as the Donald Trump administration and members of both parties in Congress, as well as successor U.S. policy leaders, continue to turn to sanctions, investment restrictions, tariffs, and trade controls to achieve foreign policy aims. At the same time, the expanding use of these measures has antagonized allies and spurred diplomatic backlash.
America’s expanding use of coercive economic measures rests on the major role of the U.S. dollar, the size of the U.S. economy, and the role of U.S. companies abroad. The fundamental strength of the U.S. economy and its large global footprint have enabled the United States to leverage that strength and interconnectedness to use sanctions and other coercive economic measures in pursuit of foreign policy goals. This report examines the factors that have allowed the expansive U.S. use of coercive economic measures in recent years, as well as how their use may change over the near term and the longer term. It also offers a set of recommendations for U.S. policymakers and other stakeholders to ensure the continued efficacy of coercive economic measures.
Over the last several decades economic, technological, and policy trends have enhanced the strength of U.S. coercive economic measures and made them an attractive option for national security policymakers. The global financial crisis, which heavily implicated U.S. banks and U.S. policymakers, actually supported U.S. economic leverage and bolstered the cogency of coercive economic tools. In the near term, U.S. coercive economic measures are highly likely to retain their strength, but in the longer term there are a number of trends that may weaken their effectiveness.
The United States’ expansive use of these measures has sparked an increasing backlash both from allies in Europe and Asia and from adversaries seeking to circumvent the U.S.-dominated global financial system. European Union policymakers have increasingly dis-cussed the possibility of increasing the role of the euro and are considering mechanisms or countermeasures in response to U.S. coercive economic measures that target European interests. China’s rise will also threaten the strength of U.S. coercive economic measures, as China increasingly develops the capacity to offer an alternative to U.S. financial and economic dominance, and seeks to leverage its economic and financial strength in pursuit of its own foreign policy goals. Financial technology developments may help enable these trends as well, as blockchain-based payment systems and other technological advances may eventually support a move away from dollar-based clearing and payments, and also facilitate a greater flow of licit and illicit money outside of traditional financial channels.
Ultimately, government policy choices in both Washington and foreign capitals will be the strongest determinant of the continued strength of U.S. coercive economic measures. These measures are powerful tools now and the United States has inherent strengths that can support its coercive economic power in the future, but poor decisionmaking in Washington, combined with aggressive policy initiatives by foreign governments, could erode U.S. coercive economic measures in the future. Policymakers should take a number of steps to ensure their continued efficacy. The goal of this report is to help provide a roadmap for them to do so.
In conjunction with this report, CNAS hosted a rollout event on April 30, 2019 featuring remarks from former Secretary of Treasury Jacob Lew and a panel discussion with authors:
Learn more about how new financial technologies pose a range of threats and opportunities to U.S. national security:
Former Adjunct Senior Fellow, Energy, Economics and Security Program
Former Senior Fellow and Director, Energy, Economics and Security Program
Adjunct Senior Fellow, Energy, Economics and Security Program
Founder and CEO, Giant Oak
Former Adjunct Senior Fellow, Energy, Economics, & Security
Co-Chair, CNAS Task Force on the Future of U.S. Sanctions
Read the full report here.
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