Beyond the Battlefield: Chokepoints in the Age of Economic Warfare

It will probably reshape the global economy in ways that we're only beginning to understand.

But let me come back to those implications.

First, I want to press you on the direction of travel from here.

And I'll just say expect economic warfare is going to continue to intensify for a simple reason.

and you just alluded to it, the cost of waging economic war is much lower than the cost of defending against it and the time required to do so.

And that means the efficacy remains high.

Sanctions, export controls, tariffs, you and I both know they can be imposed overnight with a press release.

Or in the most recent case in Iran, a handful of drones costing maybe tens of thousands of dollars can shut down a critical shipping choke point.

On the defense side, building defense against choke points, whether it's resilience in rare earth supply chains or reshoring semiconductor fabs or building a more reliable energy base, those are national projects that take years, maybe decades.

and probably hundreds of billions of dollars.

And so the path of least resistance in a world of more intense geopolitical competition is that conflict will increasingly play out in the arena of economics.

That's my view, but do you buy that framing? Oh, definitely.

I

think that we are going to see economic warfare continue to proliferate until you have a fundamentally different global economic system.

If we did move into a block-based global economy, which we can talk about later, but I actually think that in some ways that's the best case scenario for the United States, there would be probably eventually less opportunities for economic warfare, at least between the blocks, between a U.S.-centric block and a China-centric block.

That's going to take a long time.

Because there are fewer linkages.

Exactly.

That would take a long time to build.

And certainly, if you moved into a more autarkic global economy where we're not in a block-based world, but we're trying to do everything ourselves, there may be fewer linkages too.

But to your point about the time and expense required to get there, it's even higher, right, if you're trying to do it all yourself.

And I think the negative side effects are greater, too, because if you can't feel confident that you can acquire the resources and markets you need through open trade, the value of territorial conquest goes up.

So we might find ourselves fighting more military wars.

So I do think we're going to see it proliferate.

Another point, though, Dalib, some people talk to me, they say, look, China is building alternative payment systems, right? And they're actually doing a relatively good job at that.

It will probably reshape the global economy in ways that we're only beginning to understand.

But let me come back to those implications.

First, I want to press you on the direction of travel from here.

And I'll just say expect economic warfare is going to continue to intensify for a simple reason.

and you just alluded to it, the cost of waging economic war is much lower than the cost of defending against it and the time required to do so.

And that means the efficacy remains high.

Sanctions, export controls, tariffs, you and I both know they can be imposed overnight with a press release.

Or in the most recent case in Iran, a handful of drones costing maybe tens of thousands of dollars can shut down a critical shipping choke point.

On the defense side, building defense against choke points, whether it's resilience in rare earth supply chains or reshoring semiconductor fabs or building a more reliable energy base, those are national projects that take years, maybe decades.

and probably hundreds of billions of dollars.

And so the path of least resistance in a world of more intense geopolitical competition is that conflict will increasingly play out in the arena of economics.

That's my view, but do you buy that framing? Oh, definitely.

I

think that we are going to see economic warfare continue to proliferate until you have a fundamentally different global economic system.

If we did move into a block-based global economy, which we can talk about later, but I actually think that in some ways that's the best case scenario for the United States, there would be probably eventually less opportunities for economic warfare, at least between the blocks, between a U.S.-centric block and a China-centric block.

That's going to take a long time.

Because there are fewer linkages.

Exactly.

That would take a long time to build.

And certainly, if you moved into a more autarkic global economy where we're not in a block-based world, but we're trying to do everything ourselves, there may be fewer linkages too.

But to your point about the time and expense required to get there, it's even higher, right, if you're trying to do it all yourself.

And I think the negative side effects are greater, too, because if you can't feel confident that you can acquire the resources and markets you need through open trade, the value of territorial conquest goes up.

So we might find ourselves fighting more military wars.

So I do think we're going to see it proliferate.

Another point, though, Dalib, some people talk to me, they say, look, China is building alternative payment systems, right? And they're actually doing a relatively good job at that.