The use of economic tools to serve national interests is hardly new. But in the 21st century, such instruments – ranging from unlawful economic coercion to lawful but harmful trade remedies – have become central to the strategic competition between the United States and China.

Because the two countries are highly economically interdependent, the weaponisation of this interdependence is both essential and convenient, unlike during the Cold War rivalry between America and the Soviet Union.

In some cases, legal trade remedies that were designed to tackle unfair practices or national security threats are increasingly being weaponised as tools of economic coercion.

US-China rivalry

China’s aggressive pursuit of national competitiveness, rising American populism and Washington’s fears of losing global pre-eminence have prompted both nations to actively deploy their economic tools. Their aims are clear: to achieve a competitive advantage, safeguard strategic industries, create domestic jobs and win the technological race.

The US has increasingly tightened restrictions on Chinese access to sensitive high technology with both commercial and strategic applications. Recent expansions of the US Entity List have the potential to disrupt China’s ambitions to “go global”. Meanwhile, Washington’s use of tariffs under Sections 232 and 301 of the Trade Expansion Act has restricted Chinese goods’ access to the American market.

Although these mechanisms, originally established as legal trade remedies, have been used responsibly in the past, recent actions served as veiled instruments of coercion, justified by appeals to national security or the need to address unfair trade practices – blurring the line between legitimate self-protection and economic coercion.

A container ship in Qingdao, China on October 9. China has stepped up its quest for industrial and technological self-sufficiency in response to US trade actions. Photo: TNS

A container ship in Qingdao, China on October 9. China has stepped up its quest for industrial and technological self-sufficiency in response to US trade actions. Photo: TNS

In response to the US and its allies’ trade actions, China has stepped up its quest for industrial and technological self-sufficiency. Its recent ban on domestic technology firms buying Nvidia’s advanced AI chips is just one example of efforts to cultivate indigenous innovation and reduce dependence on the US.