International relations still pursue the same ends as before - bolstering national security and constraining rival states - but globalization and technological innovation have transformed the tools available to foreign policy.
The use of economic power to achieve strategic aims is not new. In his recent bestseller Chokepoints, Edward Fishman highlights how control over key economic nodes can shape world affairs. If the global economy is a web, chokepoints are the nodes where one actor can cut off flows to another.
History offers many examples. In 432 BC, Athens closed its ports to the city-state of Megara and used its navy to cut Megara’s trade with neutral partners. Millennia later, the U.S. Navy enforced an oil embargo on Iraq, devastating its economy and derailing its nuclear ambitions.
Talk of the death of globalization is greatly exaggerated
Globalization is often measured by trade intensity - the ratio of global trade to world GDP. This surged from the 1970s until plateauing around the 2007–09 Financial Crisis. Despite widespread rhetoric about “reshoring” since the COVID-19 pandemic, trade intensity has not materially fallen.
Figure 1: Globalisation has increased quickly since the 1970’s
If anything, deeper integration has multiplied the number of potential chokepoints. The logic of globalization is efficiency: firms scale up, supply chains grow leaner, and less efficient players exit. The result is concentration - and concentration creates vulnerability.
Advanced semiconductors: today’s chokepoint
The emblem of this logic is Taiwan’s TSMC, which produces about 90 percent of the world’s most advanced semiconductors. Each technological leap has raised the cost of building fabrication plants, reducing the number of firms able to compete. What was once a diversified industry is now a single point of failure.
Washington has responded aggressively. The President Joe Biden’s administration offered subsidies through the CHIPS Act, while the President Donald Trump’s administration wielded tariffs. U.S. strategic planning has even contemplated destroying TSMC’s facilities in the event of a Chinese invasion - highlighting the stakes. To hedge, the U.S. government has encouraged Samsung to expand in America and will buy a 10 percent stake in Intel.
Trump’s trade war with China and a new geoeconomic calculus
Both the Biden and Trump administrations identified semiconductors and AI as strategic technologies. Biden restricted exports of advanced chipmaking equipment to China and other “risky” states. Trump went further: banning Nvidia’s H20 GPUs designed for China and launching investigations to justify broader restrictions.
China has leverage of its own. It manufactures around 90 percent of rare earth magnets essential to industries from automotive to defence. In retaliation to U.S. tariffs, Beijing halted exports, forcing Ford to close its Chicago plant in May 2025. Other automakers reported severe disruptions.
Figure 2: China cut exports of rare earth magnets to the US in April and May 2025
The trade war transcended chokepoints. Trump’s tariffs on China rapidly escalated to 145 percent, which essentially ended all bilateral trade. As one foreign policy analyst put it, the U.S. ceased import of artificial Christmas trees. The electoral impact of a black Christmas was not lost on the Trump administration. The sheer scale of economic damage quickly resulted in a truce between the U.S. and China.
Mutually assured recession
The trade war is over. Much of the world ultimately accepted Trump’s tariffs: for many governments, the fear of losing U.S. military protection - or the costs of a prolonged trade war - outweighed the pain of higher tariffs. Europe needs Washington engaged in the war against Russia, while Japan, South Korea, and Taiwan depend on U.S. security guarantees against China.
The second U.S.–China trade war demonstrated that both economies are so interdependent that weaponizing trade inflicts severe damage on both sides. The dynamic echoes the Cold War: just as nuclear confrontation implied mutually assured destruction and thereby deterred conflict, today’s economic confrontation risks mutually assured recession. This paradox may in fact encourage restraint - making peaceful economic coexistence between the two superpowers the most likely outcome.
