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FA: America's economic weapons are now being used against It

  • By Al Mayadeen English
  • Source: Foreign Affairs
  • 19 Aug 2025 23:56
  • 1 Shares
5 Min Read

The economic weapons America created are now being used against it. Foreign Affairs analysis reveals how China forced the US into damaging concessions in 2025.

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  • FA: America's economic weapons are now being used against It
    The US Capitol building and the Capitol Christmas Tree are mirrored in the still waters of a reflecting pool early Christmas morning, Monday, Dec 25, 2023, in Washington (AP Photo/J. David Ake)

In an analysis for Foreign Affairs, Henry Farrell and Abraham Newman argue that the June 2025 "framework deal" between the United States and China was, in reality, a surrender, not just a trade agreement. They highlight that this deal marked America's entry into a dangerous new era where the economic weapons it pioneered are now being turned against it.

The Trump administration's concessions were stark, easing semiconductor export controls in exchange for China lifting restrictions on rare-earth minerals that US auto manufacturing desperately needed. American companies like Synopsys, Cadence, and Nvidia can now sell advanced technology to China again. As Farrell and Newman note, this doesn't fall under strategic flexibility; it was economic coercion forcing America's hand.

Secretary of State Marco Rubio inadvertently admitted the problem in a June speech, acknowledging that China had "cornered the market" for rare earths and put the United States in a "crunch." The administration had discovered, as the authors write, that the US's "industrial capability is deeply dependent on a number of potential adversary nation-states."

How the US got here

Farrell and Newman explain that today's economic warfare emerged from the infrastructure of globalization itself. After the Cold War, businesses built an interdependent global economy on top of US-centered systems: dollar clearing, SWIFT financial networks, Internet platforms, and semiconductor supply chains dominated by American intellectual property.

Initially, few worried about dependence on this infrastructure. But after 9/11, the United States began weaponizing these "chokepoints," key control points in global economic networks. Over two decades, America graduated from targeting those it deemed terrorists to cutting entire countries like Iran out of the global financial system and turning the Internet into a surveillance apparatus.

The authors note that they first wrote about "weaponized interdependence" in 2019, warning that this system was fundamentally unstable. Remarkably, Trump officials discovered their academic research and, according to historian Chris Miller's book Chip War, used it as a "playbook" to strengthen export controls against semiconductors, with one official calling the concept a "beautiful thing."

China's rapid adaptation

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But Farrell and Newman's primary purpose was to expose the "ugly underbelly" of such weaponization. They predicted that American actions would "invite reactions by targets and counteractions by the United States," and that's exactly what happened.

China's wake-up call came with US threats against telecommunications companies ZTE and Huawei. Chinese state media began focusing on "chokepoints" and "self-reliance," leading to what the authors describe as a "whole-of-nation system" to secure technological independence.

China's counterstrike was methodical. Beijing developed its own export control laws modeled on the US system, then went after America's weak point, rare-earth minerals. As Farrell and Newman explain, China's power comes not from simply owning these minerals, but from "domination of the economic and technological ecosystem necessary to extract and process them."

The genius of China's approach, according to the authors, was realizing that "power comes not from possessing substitutable commodities but from controlling the technological stack." Just as America restricted chip manufacturing equipment, China forbade exports of rare-earth processing equipment, creating what Farrell and Newman call "practical leverage."

America's self-inflicted wounds

Perhaps most damaging is what Farrell and Newman describe as America's "self-sabotage." The Trump administration is systematically dismantling the institutions that made US economic coercion effective. Hiring freezes have hit the Treasury's Office of Foreign Assets Control (OFAC) and the Commerce Department's Bureau of Industry and Security, the very agencies that built America's economic warfare capabilities.

The National Security Council has cut its staff by more than half, while the State Department has been "decimated by job cuts." As the authors note, this institutional decay means "short-term profit trumps long-term national interest."

More troubling still, the administration is actively undermining US technological dominance. Farrell and Newman point to aggressive promotion of cryptocurrencies that reduce dollar centrality, deals facilitating advanced semiconductor exports to regions with Chinese ties, and massive cuts to renewable energy investment that "effectively cedes control of next-generation energy technology to China."

The nuclear parallel

Farrell and Newman draw a parallel to the nuclear age, emphasizing that "economic weapons are proliferating just as nuclear weapons did." But unlike the nuclear era, when America invested heavily in institutions and strategic doctrines, today's administration is "ripping apart" the complex machinery of economic warfare.

The authors argue that successful strategy requires understanding "excruciatingly complex phenomena," like global supply chains, financial flows, and emerging technologies involving multiple governmental and private actors. This demands deep institutional expertise, not the "seat-of-the-pants policymaking" that currently runs the Trump administration.

The US choice ahead

Farrell and Newman conclude that America faces a stark choice, either continue aggressive unilateral coercion that accelerates hegemonic decline, or realign with allies by accepting limits on economic weapons, essentially "arms control" for economic warfare.

As former Treasury Secretary Larry Summers warned, there's "a growing acceptance of fragmentation" in the global economy, and "maybe even more troubling, there's a growing sense that ours may not be the best fragment to be associated with."

The stakes couldn't be higher. Farrell and Newman argue that failure to adapt "will put both American security and American prosperity at risk" as other powers build alternative systems that could eclipse US dominance entirely.

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