As the new US administration’s policies shake up markets, emerging signs indicate that the tools of economic statecraft, like the controversial cryptocurrency Dogecoin (DOGE), are likely to persist, despite the prevailing turmoil.
Waves of budget cuts, staffing reductions, and real estate sales are imposing constraints across the federal government.
However, leadership within key agencies charged with overseeing economic statecraft is doubling down on its commitment to enhance and expand these initiatives.
Beyond existing tariffs, the US is leveraging its geoeconomic influence through export controls, revising investment screening protocols, and issuing sanctions targeting critical issues such as Iran’s weaponry and oil trade, along with transnational crime at the US southern border.
In tandem, the threat of tariffs or military action against allied nations, including NATO members, jeopardizes any potential for cooperative economic strategies with those states.
What may seem routine to certain executive branch members actually reflects a crucial shift, where trade disputes and geopolitical upheavals are straining relationships with traditional allies, paradoxically undermining these pivotal tools at a time when global economic stability is most needed.
Partnerships indeed serve as a force multiplier in effective economic statecraft.
As Daleep Singh, former US deputy national security advisor for international economics, remarked, the effectiveness of economic statecraft correlates with the strength of the coalition enforcing these measures.
Historically, multilateral sanctions and cooperative targeting among allies have been central to US sanctions policies; they have fostered legitimacy and built confidence in global markets.
Nonetheless, actions taken by the current US administration, continuing its predecessors’ approaches, are putting significant stress on US relations with crucial allies like Canada and the European Union (EU).
Ursula von der Leyen, president of the European Commission, starkly observed that “the West as we knew it no longer exists.”
This disintegration of stalwart alliances poses dire implications for companies that must navigate complex compliance regulations across multiple jurisdictions, complicating an already intricate landscape.
The United States often dedicated substantial diplomatic resources to unite its allies toward harmonizing sanctions and trade controls, an expectation that can no longer be taken for granted.
The risk of diverging interests among allies, particularly concerning Russia, is on the rise.
The Kremlin’s requests for sanctions relief in exchange for a potential ceasefire in Ukraine have emerged, while the US has quietly removed certain high-profile designations, signaling a potential shift in its approach toward Russia.
Raiffeisen Bank International is notably reassessing its operations in Russia with reports suggesting it might be slowing its exit from the country, reflecting a belief that a thaw in US-Russia relations could be forthcoming.
The complexities and challenges of international economic statecraft were highlighted following significant events such as Russia’s February 2022 re-invasion of Ukraine and the United States’ 2018 ‘maximum pressure’ sanctions campaign against Iran.
After the first Trump administration withdrew from the Iranian nuclear deal, the EU enacted an expanded “blocking statute” aimed at safeguarding EU businesses from the impacts of US sanctions—yet it introduced complications and legal challenges for many major multinationals.
The concern remains: will the US adopt a similar strategy and attempt to shield its businesses from EU and UK sanctions?
As large multinationals may find themselves relieved from US sanctions constraints, they could still face obstacles imposed by European or UK laws, potentially putting them in a precarious position that invites scrutiny from both US and international regulators.
The United States cannot sustain its economic statecraft while simultaneously seeking to redefine global order; past administrations cultivated strong economic tools among its allies that cannot simply be disregarded or
image source from：https://www.atlanticcouncil.org/blogs/econographics/us-eu-sanctions-divergence-would-spell-trouble-for-multinational-companies/
