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Akbar Novruz

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The era in which the United States could wield economic pressure tools with near-total dominance is rapidly fading, as rivals increasingly weaponize their own strategic advantages, reshaping the global balance of power, AzerNEWS reports, citing a Washington Post article.

Washington once wielded overwhelming control over this tool of economic warfare. Today, American consumers and businesses are starting to experience its repercussions.

Twice in the space of a year, the United States has been weakened by its rivals’ ability to weaponize control over a major artery of the global economy. First, China used its dominance in rare earth minerals to broker a truce in the trade war under President Donald Trump. Then, Iran effectively closed the Strait of Hormuz, threatening global energy markets and forcing both sides in a six-week conflict with the United States and Israel to declare a ceasefire.

Washington used to have a near monopoly on these tools of economic warfare: punishing recalcitrant countries by cutting them off from the dollar system or cutting them off from Silicon Valley’s cutting-edge technologies. But amid the pandemic, the Russia-Ukraine war, and the worsening U.S.-China relationship, confidence in global economic integration has been shaken. Countries have increasingly come to view trade relations as a tool of pressure. In response, the United States, China, and European countries are bolstering their economic defenses by investing in domestic production of critical goods.

“The global economy was built for the 1990s. Back then, we thought China and Russia would be our friends,” says Edward Fishman, author of “The Straits,” a history of the U.S. approach to economic warfare. “But now we are living in a period of heightened geopolitical competition. This process will continue until a new global economy is formed.”

The use of economic dependence for strategic purposes is not new. The Arab oil embargo that plunged the United States into stagflation—a period of recession and high inflation combined—in 1973 is just one example. Today, the global economy offers more opportunities to use commercial relationships for strategic purposes: trade is now twice as much a share of total output as it was in 1973.

The president, who advocates an “America First” approach and criticizes globalization for the drain of jobs and wealth from the United States, often speaks as if his country exists in isolation from the world. He said earlier this year that Americans “don’t need anything” from Canada, the second-largest supplier of goods to the United States by volume. He boasts about America’s “energy independence,” even though the country still relies on imports of some petroleum products, a small portion of which passes through the strait.

Some of Trump’s closest advisers see a threat to the trade ties that have strengthened since the Cold War, especially those that have made the United States dependent on its main strategic rival, China. Secretary of State Marco Rubio has expressed public concern that if the United States does not diversify its supply chains, the economic leverage of other countries will “constrain our ability to conduct foreign policy.”

“There is virtually no major sector of the 21st century that we do not have some kind of vulnerability in. And this has become one of the most important geopolitical priorities we face now,” Rubio said in a speech last year.

Nevertheless, the United States has struggled to adapt to changing circumstances. Trump has actively used financial sanctions against countries, individuals, and companies during both terms in office. In 2018, he reimposed sanctions on Iran, the following year he imposed a “maximum pressure” policy on Venezuela, and imposed restrictions on numerous Chinese entities. In his current presidency, he has expanded sanctions on Iran, tightened export controls on about 20,000 Chinese companies, and tightened restrictions on the supply of advanced chip manufacturing equipment and jet engines to China.

But the administration seems to have failed to consider that other countries will also begin to weaponize their economic advantages. When China banned exports of rare earth materials, which are vital for civilian and military products, in response to Trump's tariffs last April, the president called the move a "real surprise" on social media.

Similarly, the United States appeared to be unable to find an adequate response when Iran closed the Strait of Hormuz. Oil markets were shaken as shipping companies refused to ignore Iran’s threats: U.S. gasoline prices topped $4 a gallon, and import-dependent Asian economies took a serious hit.

According to Ron Wyden, the top Democrat on the Senate Finance Committee and a frequent critic of the administration, the United States seemed confused. Perhaps that was because the Treasury Department had not done any analysis of the potential impact on energy markets before the war. Sriprakash Kothari, the nominee for assistant secretary for fiscal policy, told committee staff that “not only did he not do any work on energy markets before the war, he doesn’t know of any Treasury staff who did,” Wyden wrote in a letter to Treasury Secretary Scott Bessent on April 9. The Treasury Department did not respond to a request for comment.

“It turns out that the United States does not control all the straits. We live in a world where the United States can no longer do everything it once thought was permissible,” said Henry Farrell, co-author of the book “The Underground Empire,” about economic warfare.

On Friday, the president tried to downplay the global economic shock that Iran would cause by continuing its economic pressure. “The Iranians seem to not understand that they have no other option than to blackmail the world in the short term through international waterways,” Trump wrote on Truth Social.

But despite the fragile ceasefire, about 3,200 ships, including 800 tankers and cargo ships, were stuck in the Persian Gulf west of the strait, according to Windward, a London-based maritime intelligence firm. Iran is only allowing a small number of ships through — and only if they pay a fee and are not owned by a hostile country. The Iranian authorities are effectively acting like security guards at a popular nightclub: some lucky ones are able to pass through the strait, while others are forced to wait in vain.

“Some might view the Strait of Hormuz as a means of controlling the flow. The greatest power is not in a complete blockade. Iran is showing that real power is in the ability to decide who gets through and who doesn’t,” says Nicholas Mulder, a professor of history at Cornell University and an expert on sanctions.

Iran’s continued control of the strait has not only raised the prices of gasoline and diesel in the United States. It has also begun to affect the prices of mattresses, fertilizers, aluminum, plastics, fruits and vegetables.

Mohammed Abbas, president and chief operating officer of Fresh Del Monte Fruit and Vegetables in Coral Gables, Florida, is grappling with the disruption caused by the situation in the Strait of Hormuz. The nearly one-third increase in oil prices since the conflict began has increased costs in almost every aspect of his business.

“The price of fuel has gone up significantly in the last six or seven weeks — more than 30 percent. And that 30 percent is directly reflected in the cost of everything that goes into it,” he says. “I don’t think American consumers have fully realized the impact of this war yet.”

The paper mills that make Fresh Del Monte’s banana boxes consume enormous amounts of fuel. The vacuum-sealed plastic bags used to transport the fruit are made from resins made by Saudi Arabia’s SABIC, one of the world’s largest chemical companies. A few days ago, Iranian missiles and drones struck the company’s facilities in the Jubail industrial zone. Abbas says the plant could take a year to return to normal operations. Meanwhile, the price of bags made from the already scarce resin will rise.

The trucks that haul wood to paper mills and cardboard and plastic to ports run on diesel. Diesel prices in the United States are already near record highs. The same is true of banana plantations in Costa Rica, Guatemala and Ecuador. Moving cargo between plantations and local ports requires more diesel, and the fuel is now twice as expensive in Central America as it was before the war.

Fertilizer supplies, used to boost yields, are stuck across the strait. Fresh Del Monte usually keeps some of the nutrients it needs for its crops in stock, which will last until June. But after that, the company will have to compete with other desperate buyers on the open market. Abbas expects fertilizer costs to double.

Looking ahead, Abbas sees an increasingly bleak picture: soaring inflation and a weakening economy, food shortages in developing countries and economic problems that will persist even if there is a ceasefire. If the conflict in the United States continues, consumers will face a significant increase in food prices, he says. The global consequences are likely to be even more severe — Abbas believes that the scale of this crisis is comparable neither to the pandemic nor to the consequences of the Ukrainian war.

“I don’t think we’ve faced anything like this on a scale since the Great Depression,” he says. “The longer the war drags on, the worse it gets.”

The damage caused by economic weapons also provokes a backlash. Whatever the outcome of the ceasefire talks between the United States and Iran, scheduled to take place this weekend in Islamabad, Pakistan, countries that depend on the Strait of Hormuz are already drawing up plans to reduce their vulnerability to the possibility of its future closure.

In South Korea, President Lee Jae-myung is promoting the development of renewable energy sources. The Financial Times reported this month that Saudi Arabia and the United Arab Emirates are among the countries considering multibillion-dollar projects to expand new or existing pipelines that bypass the strait.

When China demonstrated its control over rare earths processing by restricting their exports, American automakers like Ford were forced to halt production of their vehicles as critical supplies of the material ran out. Later that year, China expanded its export licensing scheme to include even the sale of goods containing minimal amounts of Chinese materials to third countries—a move similar to the U.S. “direct foreign product” rule.

John Lang, who served as director of international economic affairs in Trump’s first administration, notes that China’s excessive use of its own leverage has encouraged other countries to invest in their own supply chains. The Trump administration has taken major steps to develop domestic sources of rare earths, with the federal government buying stakes in companies like MP Materials and USA Rare Earth.

“That’s why I call this ‘peak rare earths for China,’” says Lang, now CEO of APCO in Washington. “Once you start using this tool, it gradually becomes less effective.”

The result is a more fragmented and competitive global economy—one in which economic interdependence no longer guarantees stability, but instead serves as a new arena for geopolitical rivalry.