Weaponized Interdependence

On Friday Donald Trump threatened to cut off all trade with nations with which the United States runs a trade deficit. His demand, oddly, was directed at the Federal Reserve: He would impose trade embargoes unless the Fed cuts interest rates. I won’t even try to untangle his logic, if there is any, because today’s primer isn’t about Trump. It is, instead, about how to think about a world in which governments — even the government of the United States, which created the rules-based trading system that prevailed until recently — increasingly use threats to cut off international trade as a tool of coercion.

“Geoeconomics” — the study of the ways governments can use national economic strength in pursuit of geopolitical objectives — is a hot topic right now, both among scholars and at international institutions. The International Monetary Fund made geoeconomics the theme of the June issue of its F&D magazine. Geoeconomics is the theme of the European Central Bank’s annual research conference, taking place next week, at which I’m giving a talk on “economic size and economic power.” Back in August I posted a primer on relevant measures of economic size. Today, continuing my homework for the talk, I’m writing about economic power.

Specifically, I want to talk about “weaponized interdependence,” a term coined in 2019 by the political scientists Henry Farrell and Abraham Newman. Farrell and Newman focused mainly on national governments’ efforts to exploit their control of international networks, such as America’s use of the dollar’s central role in the international monetary system to impose sanctions on nations it considers hostile. At this point, however, weaponized interdependence is everywhere: Iran attempting to force the United States to call off its war by closing the Strait of Hormuz, China threatening the West with a cutoff of rare earths, the Trump administration using the threat of tariffs to pressure Canada to remove cultural protections for French — or become the 51st state?

But how should we think about weaponized interdependence? There is a rapidly burgeoning theoretical and empirical research literature on geoeconomics, surveyed for example by Mohr and Trebesch (2025.) I am not a contributor to this literature, just a consumer! But this rapidly growing field isn’t yet part of the standard way we teach international economics, let alone the way people influential in policy discuss the world. So what I thought I could do today is lay out in a very simple, maybe simplistic way what I believe to be some of the main insights from thinking about international trade as a potential tool of coercion — and what it says about the current global situation.

Beyond the paywall I will address the following:

1. What is weaponized interdependence, and how does it differ from “trade war”?

2. The sources of trade-related power

3. The special case of depression economics

4. Who has economic power in today’s world?

5. Trade in a weaponized world