Eichengreen: Geo-economic warriors should realize the perils of turning every edge into a weapon

In 1945, at World War II’s close, the economist Albert O. Hirschman published National Power and the Structure of Foreign Trade, in which he analyzed how nation-states shape trade patterns to their strategic advantage. The book sank like a stone.

It garnered just a brief summary in the American Political Science Review and was rarely if ever cited by other economists and authors.Today, Hirschman and the field he invented, known as ‘geo-economics,’ have re-emerged with a vengeance, building on his seminal ideas. These start with his ‘influence effect,’ which showed how a dominant state could structure its trade so that disruptions hurt its partners more than itself. By threatening to withhold exports or market access, this dominant state could then coerce and extract concessions from its partners.

In the last year, we have seen multiple instances of US President Donald Trump using tariffs and export controls to coerce countries to invest in the United States or grant US firms favoured market access. Unlike Hitler’s Germany, Hirschman’s original example, the Trump administration can’t be credited with having consciously shaped US trade to amplify this effect. Trump inherited a large US market and America’s high-tech leadership, which granted him leverage.

However, the resulting strategy is the same.Hirschman also pointed to a second mechanism, the ‘supply effect,’ where trade is used to stockpile resources and channel transactions toward reliable partners, strengthening economic resilience and limiting vulnerability to foreign influence. Today, we see countries friendshoring their trade and investment, enhancing their self-sufficiency in semiconductors, and stockpiling rare earths. The more things change…But some things