A Crisis in American Economic Statecraft
What Executives Need to Know
We are witnessing a dangerous convergence of unprecedented economic weaponization without corresponding institutional guardrails or strategic doctrine. The current approach risks undermining the very economic architecture that has sustained American leadership while creating massive operational challenges for private sector executives who must navigate an increasingly unpredictable and fragmented global economy.
Our Economic Power is Being Weaponized Without Wisdom
The evidence is stark and accelerating. Since 2000, the number of sanctioned individuals and entities worldwide has increased tenfold. Tariffs and trade barriers have quintupled globally in just five years. Meanwhile, Trump’s baseline US tariffs on Chinese goods peaked at 145%, and Chinese tariffs on U.S. goods reached 125%. But the statistics only tell part of the story.
What we're experiencing represents a fundamental shift from economic tools as instruments of last resort to economic coercion as a default policy lever. We have tariffs at 145 percent on China, with negotiations underway, indicating that a key theme will be the isolation of China in those discussions. This isn't strategic—it's reflexive.
A recent Foreign Affairs article correctly identifies that "economic statecraft holds both power and peril," but understates the immediate crisis we face. We have already crossed the Rubicon into what the authors call "a destructive cycle in which every foreign policy challenge triggers a sanction, a tariff, or an export control." An analysis in Wired takes this further, arguing that we are witnessing the "enshittification" of American power, where our economic platforms are being turned against allies and domestic constituencies alike.
Flying Blind in Dangerous Airspace
We lack the institutional architecture to match our expanded use of economic weapons. While the Foreign Affairs piece calls for "rules of engagement" for economic statecraft, we’re finding that no such framework exists, nor does any strategic guidance or collaboration exist at the operational level where executives must make daily decisions.
The Court of International Trade ruled that President Donald Trump exceeded his authority in imposing tariffs on all imported goods, calling an immediate halt to his signature trade war policy. Yet this legal challenge highlights a deeper problem: Trump invoked IEEPA, among other authorities, to impose new tariffs. Historically, the majority of actions taken under IEEPA have been directed at blocking foreign transactions or freezing assets; the use of IEEPA to levy import tariffs is unprecedented.
We are witnessing the improvisation of economic statecraft in real-time, with tariffs amounting to an average tax increase of nearly $1,200 per US household in 2025. Meanwhile, businesses already contending with higher input costs are likely to slow workforce expansion.
The institutional gap is profound. The aforementioned Foreign Affairs piece proposes establishing a “new Department of Economic Security,” but this overlooks the urgency of the current moment. We need immediate operational frameworks, not bureaucratic restructuring that will take years to put into effect.
Our Allies Are Already Building Alternatives
The Wired analysis reveals something our policy establishment has been slow to recognize: our allies are actively developing alternatives to American economic platforms. The German politician Friedrich Merz declared that his priority as chancellor would be to "achieve independence" from the US. The European Union is developing EuroStack, an EU-led “digital supply chain” that would grant Europe technological sovereignty independent of the US.
This isn't abstract future planning—it's happening now. The European Commission is now in advanced negotiations with a European provider to replace Microsoft's cloud services, and the Danish government is moving from Microsoft Office to an open-source alternative.
The economic implications are severe. China is already spearheading mBridge, a multi-central-bank digital currency platform that aims to settle trade directly in digital yuan and other currencies. Each defection from dollar-based systems reduces our leverage and increases the costs of future economic statecraft.
Executives Are Operating in Crisis Mode
Private sector leaders are already operating under crisis-level uncertainty that is affecting fundamental business decisions. Rising cost burdens from newly implemented tariffs are expected to weigh on hiring and wage decisions. We expect labor market weakening to become more pronounced in the months ahead.
Companies require robust in-house capabilities to monitor emerging geopolitical risks, comprehend their implications for their businesses and supply chains, and better prepare for the challenges that lie ahead. A reactive approach is insufficient for the speed and scope of current changes.
On January 20, 2025, President Trump signed an executive order instructing certain cabinet secretaries to develop reports on trade practices and recommendations for tariffs, with a due date of April 1, 2025. Since then, several new tariffs and tariff investigations have been threatened, initiated, and/or imposed. Companies cannot develop sustainable strategies in response to such rapid policy shifts.
The sophistication gap is evident in how businesses are approaching economic statecraft preparation. Experts from government, industry, and academia have plans to share their perspectives on asymmetric economic threats, discuss their responses to these threats, and explore opportunities for collaboration between policymakers and the private sector. But these discussions remain largely academic while businesses face immediate operational challenges.
What Executives Must Do Now
Based on our analysis of current policy trends and business responses, we recommend a four-pillar approach for executive preparation:
1. Build Economic Statecraft Intelligence Capabilities
Immediate Action: Establish dedicated teams to monitor policy development across multiple agencies. Companies must develop the capability to identify and anticipate policies driven by economic statecraft that may impact their businesses and assess the likelihood of their implementation.
This goes beyond traditional government relations. Companies need real-time analysis of IEEPA actions, Section 232 investigations, and evolving sanction regimes. The Commerce Department reports are due no later than 270 days, but are expected substantially sooner, with the processed critical minerals report due in 180 days.
2. Supply Chain Diversification and Resilience Planning
Critical Implementation: Companies can prepare for potential changes by reassessing their existing global manufacturing and procurement footprints and then developing contingency plans and hedging strategies to mitigate geopolitical risk.
The current environment demands scenario planning for multiple supply chain disruptions. Companies are considering options to relocate production closer to markets and diversify beyond China, while the U.S. and Chinese governments are taking steps to protect their industries and enhance their competitiveness.
3. Financial Architecture Hedging
Strategic Priority: Given the weaponization of dollar clearing systems and platform dependencies, companies must develop financial pathways to mitigate these risks. This includes exploring regional payment systems, exploring alternative options for specific transactions, and establishing deeper relationships with non-US financial institutions.
4. Government Engagement and Public-Private Partnership Strategy
Long-term Positioning: The most urgent challenge for the United States is to strengthen supply chains by building a new version of economic statecraft, based on close dialogue between the public and private sectors, that can mobilize private capital in a coordinated approach.
Avoiding Economic Self-Destruction
The Foreign Affairs piece correctly identifies that "if the United States is to maintain its unique leadership role in the global economy, it must clearly define the objectives of economic statecraft, create the institutional capacity to match that mission, and embrace a more positive vision for the use of economic tools."
However, our analysis suggests that the timeline for such systematic reform may be too slow to address current challenges. The Wired analysis warns that "US citizens may find themselves trapped in a diminished, nightmare America—like a post-Musk Twitter at scale—where everything works badly, everything can be turned against you, and everyone else has fled."
We are in a race between building effective economic statecraft institutions and triggering a broader retreat from American economic platforms that would fundamentally undermine our economic leverage.
The economic data supports this concern. Real GDP fell 1.7% in certain scenarios, with declines in consumer spending, government spending, business investment, imports, and exports on a year-over-year basis. In contrast, Real Gross Domestic Product (GDP) decreased at an annual rate of 0.3% in the first quarter of 2025.
Recommendations for Executive Action
Immediate: Establish cross-functional teams combining legal, operations, finance, and government relations to monitor and respond to economic statecraft developments.
Short-term: Develop scenario-based supply chain and financial architecture alternatives that can be activated quickly in response to policy changes.
Medium-term: Build strategic partnerships with allies and neutral parties to maintain operational flexibility regardless of US policy direction.
Long-term: Engage constructively in public-private partnerships that can help shape more sustainable economic statecraft frameworks.
We are witnessing the potential collapse of the economic order that has sustained American leadership and global prosperity. The question is whether we can build sustainable, effective economic statecraft institutions before our improvised approach triggers the very fragmentation and decline it aims to prevent.
The answer will largely depend on whether private sector leaders can navigate this transition successfully while helping to shape more constructive policy frameworks. The current moment demands both tactical adaptation and strategic vision—a combination that will test the capabilities of even our most experienced executives.
Primary Sources
"The Right Way to Wield America's Economic Power: Without Statecraft, Even the Most Powerful Tools Will Be Self-Defeating" - Foreign Affairs, 2025 - https://www.foreignaffairs.com/north-america/right-way-wield-americas-economic-power
"The Enshittification of American Power: First Google and Facebook, then the world" - Henry Farrell, Wired, July 15, 2025 - https://www.wired.com/story/enshittification-of-american-power/
This work synthesizes research from multiple authoritative sources spanning government policy documents, economic forecasting institutions, legal analysis, business strategy consulting, and academic research. Our analysis draws from real-time economic data (Deloitte, EY, Bureau of Economic Analysis), official White House policy statements and executive orders, federal court rulings on tariff legality, comprehensive tariff tracking databases, strategic consulting reports (Boston Consulting Group, Atlantic Council), and interdisciplinary academic research from leading think tanks and universities. The synthesis integrates perspectives from finance ministries, trade compliance experts, supply chain specialists, and economic statecraft practitioners to provide a holistic view of current policy impacts and business implications. Sources range from immediate policy implementation documents to long-term strategic frameworks, ensuring both tactical relevance and strategic context for executive decision-making.