Economic Weapons of the Future: Technology, Data, and the New Battlegrounds

This article features insights from my new book "Weaponized Economy: The Hidden History of Trade Wars and Their Impact on Global Politics"

The New Arsenal: Beyond Tariffs and Sanctions

The language of economic warfare has traditionally been spoken through tariffs, blockades, and sanctions. Today, however, a new lexicon is emerging—one defined by technological standards, data flows, and digital sovereignty. As I explore in my book "Weaponized Economy," we are witnessing the evolution of economic weapons into forms that would have been unimaginable just decades ago.

These new weapons are reshaping how nations compete and conflict in profound ways. Unlike traditional economic measures that target physical goods and financial transactions, these emerging tools strike at the foundations of modern economic power: information, technology, and intellectual resources.

Digital Sovereignty: The New Frontier of Economic Power

The concept of "digital sovereignty"—a nation's ability to control its digital destiny—has emerged as a critical battleground in economic competition. Countries are racing to ensure their digital infrastructures, data, and technological capabilities remain under national control.

The Splinternet: Competing Digital Domains

We're witnessing the fragmentation of the once-unified global internet into competing spheres of influence:

• China's Great Firewall: Creating a controlled information environment behind technical barriers

• Russia's Sovereign Internet Law: Developing the capacity to disconnect from the global internet during crises

• EU's GDPR and Digital Services Act: Establishing European standards for data protection and platform regulation

• US Clean Network Initiative: Creating technological ecosystems free from Chinese influence

This fragmentation represents more than just regulatory differences—it reflects fundamentally different visions of how the digital economy should be organized and who should control it.

Digital Currencies as Economic Weapons

Central bank digital currencies (CBDCs) may become the most powerful economic weapons of the coming decade. China's digital yuan (e-CNY) represents the first major CBDC from a world power, with profound implications:

• Sanctions resistance: Creating payment channels outside traditional banking systems

• Surveillance capability: Enabling unprecedented visibility into economic transactions

• Dollar displacement: Potentially challenging the US dollar's dominance in international trade

My research indicates that by 2030, over 80% of central banks will have launched digital currencies, creating a fragmented monetary landscape where economic influence will flow to those who control the most widely adopted digital currency standards.

The Technology Standards Battle

Standards—the technical specifications that determine how technologies function and interact—have become critical terrain in economic competition. As one Chinese government document noted: "Standards are the commanding heights, the strategic high ground and the right to speak in international competition."

5G and Beyond: The Infrastructure Power Play

The battle over 5G technologies between Huawei and its Western competitors exemplifies this new form of economic warfare:

• Infrastructure dependency: Nations that adopt Chinese 5G standards potentially become technologically dependent on China

• Intelligence concerns: Fears about surveillance capabilities embedded in network equipment

• Market access: The ability to shut competitors out of entire national markets through technical standards

This pattern is repeating across emerging technologies:

• Artificial intelligence standards and ethics frameworks

• Internet of Things protocols and interoperability specifications

• Quantum computing security standards

• Smart city infrastructure guidelines

The nations that successfully establish their standards as global norms gain enormous economic advantages—their companies face lower adaptation costs, their technologies spread more rapidly, and they shape the technological environment to suit their strategic interests.

Data as the New Oil: Control and Exploitation

If the 20th century was defined by competition for energy resources, the 21st century is increasingly about competition for data—the fuel of the digital economy.

The New Resource Nationalism

Countries are implementing increasingly aggressive data localization requirements:

• China's Data Security Law: Requiring critical information infrastructure operators to store data within China

• Russia's Personal Data Law: Mandating that data on Russian citizens be stored on servers within Russian territory

• India's Data Protection Bill: Classifying certain data as critical and requiring local storage

These measures represent a form of "data nationalism" analogous to resource nationalism in previous eras. The stakes are immense—artificial intelligence development, precision marketing, financial services, and national security all depend on access to vast data repositories.

Corporate Data Proxies

An emerging trend is the use of national champion companies as proxies in data competition. TikTok, for instance, has become a focal point in US-China tensions precisely because of concerns over data flows and potential influence operations.

This blurring of lines between corporate and national interests creates new vulnerabilities and advantages:

• Companies gain state protection and support

• Nations gain access to global data through corporate entities

• Traditional distinctions between economic and security concerns collapse

The Rare Earth Dilemma: Physical Foundations of Digital Power

Despite the seemingly virtual nature of digital power, it remains fundamentally dependent on physical resources—particularly rare earth elements and critical minerals. China's dominance in this sector represents one of its most powerful economic weapons.

China controls:

• 85% of global rare earth processing capacity

• 60% of global rare earth mining

• 77% of global battery cell manufacturing capacity

These materials are essential for:

• Electric vehicle batteries

• Wind turbines and solar panels

• Missile guidance systems

• Smartphones and computer hardware

Chinese officials have explicitly referenced this dependency as a potential weapon in trade disputes. As one Chinese official commented during trade tensions with the US: "Will rare earths become China's counter-weapon against the US's unwarranted suppression? The answer is not mysterious."

Green Protectionism: Environmental Standards as Economic Weapons

Environmental standards are increasingly used as tools of economic competition:

• Carbon border adjustment mechanisms: Imposing tariffs on carbon-intensive imports

• Sustainable supply chain requirements: Creating non-tariff barriers for emerging market competitors

• Green subsidies: Supporting domestic industries under the guise of environmental protection

The EU's Green Deal and the US Inflation Reduction Act both contain elements that function as de facto economic weapons, designed to protect domestic industries while pursuing legitimate environmental goals.

Demographic Warfare: The Competition for Talent

Perhaps the most overlooked dimension of modern economic competition is the battle for human capital. Countries increasingly recognize that technological leadership depends on attracting and retaining the world's top talent:

• Visa programs for tech workers: Creating pathways for high-skill immigration

• Research university funding: Establishing centers of excellence to attract global talent

• Diaspora engagement: Mobilizing nationals abroad for technology transfer

The United States has historically dominated this dimension of economic competition, with its universities and tech companies attracting top global talent. However, China's "thousand talents" program and similar initiatives represent deliberate attempts to change this dynamic.

Navigating the New Economic Battlefield

For businesses, investors, and policymakers, several strategies emerge for navigating this complex landscape:

1. Technology diversification: Reducing dependency on technologies that may become geopolitically contested

2. Standards monitoring: Actively tracking emerging technology standards in key jurisdictions

3. Data strategy: Developing approaches that comply with fragmenting regulatory regimes

4. Supply chain resilience: Building redundancy for critical materials and components

5. Talent development: Investing in skilled workforce development as a strategic priority

The Future Balance of Power

The economic weapons described above are reshaping the global balance of power. Nations that master these new tools of economic warfare will gain advantages that transcend traditional metrics of GDP and military might.

Three scenarios appear most likely:

1. Digital bipolarity: The world divides into US-led and China-led technological spheres

2. Regulated pluralism: International institutions develop new frameworks to govern technological competition

3. Regional techno-blocs: Multiple centers of technological power emerge, with regional standards and systems

The path we take depends not just on geopolitical competition but on our collective ability to recognize the dangers of unrestricted economic warfare in the digital age.

As I argue in "Weaponized Economy," these new economic weapons may prove even more consequential than their historical predecessors. Understanding their nature and implications is essential for anyone seeking to navigate our increasingly complex global landscape.

For a comprehensive analysis of how economics is being weaponized in global competition, explore my new book here.