Book Preview: Weaponized Economy - The Hidden History of Trade Wars

Exclusive Preview: "Weaponized Economy: The Hidden History of Trade Wars and Their Impact on Global Politics"

I'm excited to share this exclusive preview from my new book examining how nations have transformed economic policies into weapons of statecraft throughout history and their implications for our future.

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Introduction: Economy as a Battlefield

In today's world, a nation's power is determined not only by military might but also by economic potential. When direct military force becomes too risky, states turn to economic instruments to achieve their geopolitical goals. Trade wars, sanctions, tariffs, and embargoes are the weapons of a new era, often no less destructive than traditional military actions.

Have you ever wondered what makes a country truly powerful? The military? Yes, undoubtedly. Some nuclear-armed countries never miss an opportunity to remind others of this fact at international conferences. But to create such weapons, one must first design, build, maintain, and modernize them. This requires advanced technologies, which in turn demand resources.

Perhaps true power lies in access to resources? You would be right here too. But not all territories are equally blessed by nature. Some are rich in oil, others in rare earth metals, still others in fertile soil. Therefore, states are forced to trade with each other, exchanging surpluses of some resources for goods they lack.

But what happens when trade relations are used as an instrument of pressure? When mutually beneficial cooperation gives way to economic confrontation? When tariffs, sanctions, and embargoes become weapons in the hands of states?

In this book, we will thoroughly examine the history of economic conflicts, from Napoleon's Continental Blockade to the modern trade war between the United States and China. We will trace the evolution of trade wars and show how they have affected the fates of entire nations and changed the contours of world politics. You will learn about the shocking consequences of economic sanctions and why they often bring pain not only to those against whom they are directed but also to those who initiate them.

France vs. Great Britain: The First Global Economic Blockade

Imagine a world dominated by one superpower that has controlled global markets for decades. It dictates its terms and sells its goods worldwide. But suddenly, a competing country emerges that is rapidly developing, increasing production, and taking away traditional markets. The hegemon, seeing that it is losing influence, imposes tariffs against the competitor—first 10%, then 20%, and eventually 50%, effectively prohibiting the import of the rival's goods.

You may already have specific countries in mind for this scenario. But this is not about the contemporary confrontation between the US and China, but about Great Britain and Napoleonic France at the beginning of the 19th century.

Economic weapons have been used since ancient times. History remembers trade wars between Athens and Sparta, medieval embargoes, and the confrontation between England and Holland. However, the Continental Blockade is considered the truly textbook example—the first global economic war between France and Great Britain.

Background to the Conflict: The Struggle for Dominance

The confrontation between France and Great Britain has roots in the 17th century, when both countries began active colonial expansion, clashing over control of trade routes and overseas territories. The Franco-British rivalry reached its peak during the Seven Years' War (1756-1763), when Great Britain won a decisive victory, asserting its dominance at sea and capturing most of the French colonies in North America and India.

The French Revolution of 1789 and the subsequent wars of revolutionary France against European monarchies only intensified the confrontation. When Napoleon Bonaparte came to power in 1799, France was already at war with Great Britain.

Napoleon quickly took control of a significant part of Europe: Italy, Holland, Spain, and several German lands. However, the British fleet, which dominated the seas, prevented him from completely subjugating Europe and deprived him of resources for future military campaigns. Additionally, London financially supported anti-French coalitions, forcing Napoleon to fight on several fronts simultaneously.

In 1805, Napoleon decided to strike directly at Great Britain by planning an invasion of the British Isles. However, this required a powerful fleet. During the preparation for the naval operation, the famous Battle of Trafalgar took place, in which British Admiral Horatio Nelson crushed the Franco-Spanish fleet: of 33 ships, France and Spain lost 22.

After this defeat, Napoleon realized that Britain could not be defeated militarily. So he decided to strike at its economy.

The Boomerang Effect: How the Blockade Hurt France Itself

Paradoxically, the Continental Blockade inflicted greater damage on continental Europe than on Great Britain. European countries, deprived of British goods, quickly felt the negative consequences.

In Lyon—the center of the French silk industry—thousands of people were left without work due to the absence of English textiles. This led to rising social tensions and even uprisings. Colonial goods (sugar, coffee, cotton, tobacco, spices) either disappeared from the market or became incredibly expensive. If previously 1 kg of coffee could be exchanged for 5 kg of beef, now it cost as much as an entire cow.

Without British coal and metals, military production virtually stopped, which particularly affected the French army, which constantly needed replenishment of armaments due to Napoleon's continuous wars.

The French aristocracy, which initially supported Bonaparte, began to express dissatisfaction. Textile magnates of Normandy and Alsace openly criticized the emperor's policy. The Peninsular War broke out in Spain, and there was an uprising in Tyrol.

The Continental System transformed from a tool of victory into a millstone around Napoleon's own neck. To save the situation, he was forced to start new military campaigns that did not bring the desired success. The attempt to occupy Spain turned into a guerrilla war, secretly financed by Britain. A significant amount of resources was also spent on suppressing revanchist sentiments in Austria.

Consequences: The Collapse of Napoleon's Empire

The economic war turned out to be not just trade barriers and prohibitions, but a whole chain of reactions that hit both sides. The question is only who was simply hurt and uncomfortable, and who was destroyed by it.

The Continental Blockade became the first global historical example of how methods of warfare evolved from direct bloody confrontations to economic restrictions, which proved capable of inflicting no less damage on the enemy.

The price of this trade war was the fall of the French Empire. In 1814, troops of the anti-French coalition entered Paris, and Napoleon abdicated and was exiled to the island of Elba. After an unsuccessful attempt to return to power (the "Hundred Days"), Bonaparte was finally defeated at Waterloo in 1815 and was exiled to the island of St. Helena, where he spent the last years of his life.

Great Britain, on the other hand, celebrated victory and affirmed its dominant position on the world stage. On June 20, 1815, a grand parade was held in London's Hyde Park to celebrate the victory over France.

Great Britain vs. China: The Opium Wars

For several centuries, Europeans sought to penetrate Chinese territory to acquire the technologies for producing unique Chinese goods that were highly valued in world markets. This process was accompanied by industrial espionage, diplomatic intrigue, and ultimately military conflicts known as the Opium Wars.

By the beginning of the 19th century, the trade imbalance between Europe and China had reached a critical point. Europeans literally lined up for Chinese tea, silk, and porcelain, while the Chinese were not interested in European textile and industrial goods. This led to a huge outflow of silver from Europe to China.

Great Britain felt this problem particularly acutely. It spent tons of silver on purchasing tea, and China was becoming one of the richest states in the world. A natural question arose: how to make the Chinese return the precious metal?

The Opium Strategy: The Cynicism of British Policy

Britain's solution turned out to be cynical and destructive. Through its colony of India, it began to massively import opium into China, which was sold only for silver. This changed the entire economic system of the Middle Kingdom in just a few years. Money that previously went to the country's development now flowed into British pockets. More than 10 million Chinese acquired an addiction to opium, and the country's economy rapidly degraded.

The scale of the opium trade was colossal. By 1839, the British East India Company was annually importing about 1,400 tons of opium into China. The situation was exacerbated by the fact that opium consumption was prohibited in Britain itself—it was produced exclusively for export to China.

The Chinese Emperor Daoguang, concerned about the catastrophic situation, appointed the special commissioner Lin Zexu in 1839 to combat the opium trade. Lin confiscated and destroyed more than 1,200 tons of opium in the port of Guangzhou (Canton), first mixing it with lime and seawater. This action was a direct challenge to British interests.

In response to Lin Zexu's actions, Great Britain accused China of "restricting free trade" and began military aggression. The First Opium War (1839-1842) began, in which China had virtually no chance of victory.

From this moment on and for the next 100 years, China effectively lost its sovereignty and turned into a semi-colony, governed through a system of unequal treaties. This period is known in Chinese historiography as "bainian guochi"—"the century of humiliation."

The Opium Wars are a vivid example of how economic weapons (in this case, forced drug trade) can be used to subjugate an entire civilization. And it is not surprising that some analysts draw parallels between the 19th-century Opium Wars and modern trade conflicts, including the confrontation between the US and China.

The US-China Trade War: The Struggle for Global Leadership

The trade war between the United States and China, which began during Donald Trump's first presidency, has become the most significant economic conflict of modern times. Today, this confrontation is gaining new strength and calls into question the future of all world trade.

Economic relations between the United States and China began to develop actively after Deng Xiaoping's reforms in the late 1970s and reached a new level after China's accession to the WTO in 2001. In a period that is short by historical standards, China transformed from a poor agricultural country into the "world's factory" and the second largest economy in the world.

For a long time, the United States welcomed China's economic growth, viewing it as a beneficial trading partner and a potential market for American goods. However, by the end of the 2010s, attitudes in Washington had changed.

The main reason was the colossal trade imbalance. By 2018, the US deficit in trade with China had reached $419 billion. American manufacturers could not compete with cheap Chinese goods, which led to the closure of many enterprises and the loss of jobs in traditional industrial regions of the United States.

In addition, the US accused China of:

• Unfair trade practices, including currency manipulation

• Forced transfer of technology by American companies operating in China

• Theft of intellectual property

• Industrial espionage

• Government subsidies to Chinese companies

Technological Dimension: A Blow to Chinese Companies

Parallel to the tariff war, the US delivered targeted strikes against Chinese tech giants.

In May 2019, the US Department of Commerce blacklisted Huawei, prohibiting American companies from selling technologies and components to the Chinese smartphone and telecommunications equipment manufacturer without a special license. Google terminated cooperation with Huawei, depriving new smartphones of access to Google services (Play Store, Gmail, YouTube, etc.).

Similar measures were taken against ZTE, one of the leaders in the development of equipment for 5G networks. The US imposed a seven-year ban on the sale of American technologies to the company. ZTE, critically dependent on American microchips, was forced to suspend production. After paying a fine of $1.4 billion, sanctions were eased, but the company remained under strict US control.

TikTok, a popular social network owned by Chinese ByteDance, also came under pressure. In August 2020, Trump signed an order requiring the sale of TikTok's American business to an American company within 45 days. Although this measure was not implemented due to legal proceedings, TikTok remains under constant pressure in the US and other Western countries.

Chinese Response: Asymmetric Measures

Unlike the loud statements of the American administration, China acted more restrainedly, following the principle of "slow and steady wins the race." Instead of direct confrontation, Beijing chose an asymmetric response.

China's main weapon is rare earth metals. According to the US Geological Survey, China possesses more than 40% of the world's reserves of these strategically important elements and controls up to 80% of their global production. Rare earth metals are necessary for the production of all modern electronics, from smartphones to missile guidance systems.

In 2019, China hinted at a possible restriction on the export of rare earth metals to the US, which caused serious concern in American industry. Although a full ban was not imposed, China demonstrated a powerful leverage.

Formation of Two Economic Systems: Global Split

The trade war between the US and China is leading to the formation of two parallel economic systems, a new "economic iron curtain." The world is once again splitting into two poles, and countries affected by this split will have to choose a side.

The Western pole, led by the US, relies on:

• Dollar dominance in international settlements

• Control over key technologies, especially in microelectronics

• Powerful financial system (Wall Street)

• NATO military superiority

• Traditional alliances with Europe, Japan, South Korea, and Australia

The Eastern pole, led by China, is forming an alternative system:

• Settlements in national currencies and gradual displacement of the dollar

• Development of independent technological chains

• Creation of parallel financial infrastructure

• Strengthening military partnership with Russia and other countries

• Expanding influence in Asia, Africa, and Latin America through economic projects

Between these poles are countries seeking to balance and benefit from cooperation with both sides: India, Brazil, Indonesia, Turkey, UAE, and many others. Their choice may ultimately determine the outcome of the global confrontation.

The Psychology of Trade Wars

Behind economic indicators, tariff rates, and trade agreements lies a powerful psychological subtext that often determines the nature and intensity of trade wars. Understanding the psychological factors affecting trade conflicts helps explain why countries sometimes make decisions that go against their economic interests.

National Pride and Prestige

History shows that trade wars often start for reasons of national pride and prestige. When the rulers of China forced European diplomats to kowtow as a sign of submission to the emperor, they were guided not by economic logic but by a desire to confirm their status as the "Middle Empire" to which all "barbarians" should submit.

Similarly, Napoleon's decision on the Continental Blockade of Great Britain was dictated not only by economic calculations but also by wounded pride after the defeat at Trafalgar. He sought to prove that France could achieve victory over the "nation of shopkeepers" by alternative methods.

In the modern world, the rhetoric of "national humiliation" and the need to "restore greatness" often accompanies trade conflicts. Donald Trump appealed to these feelings by promising to "bring jobs back to America" and "make China play by the rules." China, in turn, views American pressure through the prism of the "century of humiliation" and the West's desire to contain its legitimate rise.

Fear of Loss of Control

Globalization has created an unprecedented level of interdependence between countries, which causes a natural fear of loss of sovereignty and control. Countries fear becoming overly dependent on foreign suppliers of critical goods and technologies.

The COVID-19 pandemic intensified these fears, showing the vulnerability of global supply chains. When countries lacked medical masks, ventilators, and medicines, there came a realization of the risks of excessive specialization and international division of labor.

Even more acute concerns are raised by dependence on potential adversaries. European fear of energy dependence on Russia, American fear of technological dependence on China, Chinese fear of food dependence on the US—all these are psychological factors pushing countries toward protectionism and trade restrictions.

Economic Weapons of the Future: New Trends

In the coming decades, we are likely to see the evolution of economic weapons under the influence of new technologies and changes in the global balance of power.

Digital Sovereignty and Digital Currencies

One of the key battlefields is becoming the digital space. Countries seek to ensure "digital sovereignty"—the independence of their digital infrastructures and data from foreign control.

China has created its own internet behind the "Great Chinese Firewall." Russia is trying to build an autonomous Runet. The EU is promoting the concept of "technological sovereignty" and its own data processing rules (GDPR). The US is strengthening control over key internet protocols and cloud services.

Central bank digital currencies (CBDCs) may become a new tool in economic wars, allowing for bypassing traditional financial sanctions. The Chinese digital yuan (e-CNY), already being tested in several provinces, could potentially undermine the global dominance of the dollar, especially within the Belt and Road Initiative.

According to forecasts by the Bank for International Settlements, by 2030, more than 90% of the world's central banks will issue their own digital currencies. This could lead to the formation of regional payment systems competing with SWIFT and capable of protecting participants from financial sanctions.

Technology Wars and Data Control

"Whoever owns the data owns the future"—this principle is becoming the basis for geo-economic struggle in the 21st century. Artificial intelligence, big data, 5G, quantum computing—all these technologies depend on massive data sets and are turning into tools of economic dominance.

A new form of protectionism is data localization requirements. Russia, China, India, Vietnam, and other countries have adopted laws requiring foreign companies to store their citizens' data on servers within the country. This complicates life for transnational corporations and creates a fragmented digital space.

Control over standards and patents in high technology is becoming critically important. About 80% of 5G standards are controlled by Chinese companies (primarily Huawei), which causes serious concern in the US and Europe. A similar struggle is unfolding for standards in artificial intelligence, the "Internet of Things," and blockchain.

Green Protectionism and Climate Wars

The environmental agenda is transforming into a new form of economic weapon. "Carbon border taxes," first introduced by the EU as part of the "Green Deal," are actually a new form of protectionism, protecting European producers from competitors from countries with less stringent environmental standards.

By 2030, the global market for "green" technologies will reach $10-15 trillion, and control over key links in this market will become the subject of fierce competition between the US, EU, and China.

Conclusion: Economy as a Weapon of the 21st Century

The history of trade wars from Napoleon to Trump shows that methods of economic pressure have evolved, becoming increasingly sophisticated while retaining their destructive power. If earlier countries used simple mechanisms of blockade and tariffs, today they have a whole arsenal of tools: from targeted sanctions and technological embargoes to cyber attacks and currency manipulations.

Trade wars have become the weapon of choice in an era when direct military clashes between nuclear powers are too risky. They allow serious damage to be inflicted on an opponent with relatively low risks of escalation. However, as historical experience shows, economic conflicts rarely remain purely economic and tend to develop into a broader confrontation.

Modern trade wars differ from their historical predecessors in their deep asymmetry. If earlier opponents used similar tools (tariffs against tariffs, blockade against blockade), today each side applies those means in which it has a comparative advantage. The US relies on financial sanctions and technological restrictions, China on control over supply chains and rare earth metals, Russia on energy pressure.

This asymmetry makes modern economic conflicts less predictable and potentially more dangerous, as the parties may misjudge the scale and nature of the opponent's countermeasures.

The current confrontation between the US and China has every chance of becoming the defining conflict of the first half of the 21st century, similar to how the Cold War between the US and USSR defined the second half of the 20th century. Its outcome will shape a new world order, a new global economic architecture, and new rules for international relations.

In this context, the historical experience of previous trade wars takes on special importance. Those who do not learn from history are doomed to repeat its mistakes. And the price of these mistakes in the nuclear age may be prohibitively high.

As American economist John Kenneth Galbraith said: "Nuclear war does not defend a country and does not defend a system. Even the most experienced ideologue could not tell the difference between the ashes of capitalism and the ashes of communism."

Similarly, in the modern interdependent world, there are no winners in a total economic war—there are only those who lose less than others. And understanding this fundamental fact may be the key to preventing catastrophic scenarios in the development of existing trade conflicts.

For a comprehensive analysis of how nations have weaponized their economies throughout history and what it means for our future, explore my new book here.