Washington | China and Iran have weaponised the global economy to corner the US by squeezing global supply chains, leveraging commercial links to make strategic gains, according to a report in The Washington Post.
The report cited China limiting rare earth minerals exports to the US last year and the recent closure of the Strait of Hormuz by Iran that led to a rise in oil prices across the world as examples of adversaries beating Washington at its own game of economic warfare.
“Washington once enjoyed a near-monopoly over this type of economic warfare, punishing wayward nations by barring them from using the dollar or enjoying access to Silicon Valley’s most advanced technologies,” the report said.
The US Treasury Department had performed no pre-war analysis of the conflict’s potential energy market consequences, the report said, quoting Senator Ron Wyden of Oregon, the senior Democrat on the Senate Finance Committee.
Sriprakash Kothari, nominated to become assistant treasury secretary for economic policy, told committee staffers “that not only did he not perform any work related to energy markets leading up to the war, but that he wasn’t aware of anyone at Treasury who did,” Wyden said in an April 9 letter to Treasury Secretary Scott Bessent.
According to the Post, commercial linkages have emerged as potential pressure points on the global economy, as was witnessed during the Covid-19 pandemic, the Russia-Ukraine war and the turbulence that hit the US-China relations.
In response, the United States, China and Europe are all moving to bolster their economic defences by investing in domestic production of essential goods, the report said.
“The global economy was designed for the benign environment of the 1990s, when we assumed that China and Russia would be our friends. But we’re living in a period of intensifying geopolitical competition,” said Edward Fishman, author of “Chokepoints,” a history of the US approach to economic warfare.
“This process is just going to keep going on until you have a new global economy,” Fishman was quoted by the Post.
US Secretary of State Marco Rubio has worried publicly that other nations’ economic leverage will “constrain our ability to make foreign policy” unless the US diversifies its supply lines, the report said.
“There is virtually none of the leading-edge industries of the 21st century in which we don’t have some level of vulnerability, and it’s become one of the highest geopolitical priorities that we now face,” Rubio said in a speech last year.
The Post said the Trump administration has been caught unawares when other nations have weaponised their economic advantages.
Last April, when China retaliated for Trump’s tariffs by banning exports of rare earth materials — critical ingredients in civilian and military products — the president called the move “a real surprise” on social media.
Likewise, the US seemed to have no answer when Iran closed the Strait of Hormuz.
“It turns out that the United States does not have all the choke points. We are in a world where the US simply cannot get away with the stuff that it thought it could get away with,” said Henry Farrell, co-author of “Underground Empire,” a book about economic warfare.
Iran’s continuing grip on the strait has not only pushed up the prices Americans pay for gasoline and diesel fuel, it is also beginning to do the same for mattresses, fertilizer, aluminum, plastics, and fruits and vegetables, the report said.