From Economic Warfare to Global War?

At key points over the last century, unbridled nationalism and economic warfare have driven geopolitical competition, with disastrous consequences. These destructive forces have been unleashed again with scant regard to the lessons of history. The imposition of sweeping tariffs on global trade partners is not just a source of financial risk. At a time of heightened global disorder, it moves the world one big step closer to large-scale conflict. For the United States, this could be a conflict without the benefit of allies.

The world has been here before. In the decade prior to World War I, fear of relative economic decline drove strategic perceptions in ways that contributed to instability in Europe, even—perhaps especially—against a backdrop of high economic interdependence. Both winners and losers of that enormously destructive conflict emerged convinced that economic instruments had shaped the outcome, for better or for worse. During the interwar years, virtually every major power, including the United States, had a ministry of economic warfare aimed at honing the capacity for sanctions, blockade, and export controls. US protectionism spurred a trade war among former allies. Germany and Italy aimed for economic self-sufficiency through industrial policy and territorial expansion. The Soviet Union sought economic autarky on its own terms. Japan, acutely aware of its dependence on foreign sources of critical resources, sought to preempt its exposure through aggressive expansion and the creation of a Greater East Asian Co-Prosperity Sphere. In key respects, World War II was the product of a toxic brew of nationalism, economic anxiety, and faith in the power of political will to beat the strategic odds. Reflecting on this experience, three developments are particularly worrisome.

First, the slide from crisis to war can be rapid. In 1914, the security order in Europe collapsed within a period of weeks, driven in large measure by a shared sense that caution would lead to disadvantage. This was a product of preexisting mobilization plans but also reflected the desire to transcend the damage from the severe disruption of global trade and finance already evident by the summer of 1914. Existing anxiety over economic competitiveness and financial exposure reinforced the logic of war and hastened the slide toward conflict. Today, concerns of this kind abound on both sides of the Atlantic and in Asia.

Second, declining economic interdependence and the disruption of global value chains can be destabilizing in their own right. Nations may be antagonistic, with competing interests and objectives, but there will always be a cost-benefit calculus in relation to conflict and the use of force. China and the United States may indeed be ardent competitors, even adversaries, but the costs of economic disruption have always influenced strategy in Beijing and Washington. The perception that one or both sides simply have nothing to lose may not lead directly to deliberate conflict. But it could have a profound effect on behavior when things go wrong through provocation, brinksmanship, or an accidental clash. The escalatory costs of economic decoupling, much less active economic warfare, should not be underestimated. 

Third, in the 1930s, tariff-fueled economic crises exacerbated social strains and supported the rise of radical ideologies and the collapse of the political center in Western Europe and Japan. Nationalism, identity politics, and the drive for economic self-sufficiency were common characteristics in the interwar strategic environment. In the United States, these conditions supported the America First movement and a sovereignty-conscious disdain for European entanglements. It took Pearl Harbor and an internationalist president to wake the country from an inward-looking isolationist slumber. Economic stress and social dislocation encouraged a search for culprits and conspiracies, and a general atmosphere of xenophobia. In this respect, among others, 2025 begins to look disturbingly like 1935.

None of this is meant to suggest that an obsession with economic warfare leads inevitably to conflict, much less global war. But the odds of such a progression, already significant, have shortened considerably. And this could be a war the United States fights alone. Allies, even those alienated by trade frictions, might still be inclined to back Washington. But there is no guarantee, and adversaries may be encouraged by the prospect that European and Asian partners will stand aside or hedge. The lesson is clear. Economic warfare can easily turn geopolitical competition into large-scale conflict. 

Dr. Ian Lesser is a Distinguished Fellow at the German Marshall Fund of the United States (GMF) and leads GMF’s Brussels office.