New CNAS report sets a strategic framework for U.S. coercive economic statecraft toward Beijing.

Washington, December 7, 2021—The United States and its allies are increasingly forced to respond to coercive economic statecraft—i.e., restrictions on trade, investment, and financial transactions intended to impose economic costs on a target in pursuit of strategic objectives—employed by China. At the same time, the United States lacks a broader strategy for the effective use of economic tools to manage and respond to scenarios of geopolitical tension. A new CNAS report sets a new strategic framework for U.S. coercive economic statecraft toward Beijing.

To gain new insights into U.S.-China economic escalation dynamics, CNAS conducted two unique tabletop exercises. The first scenario presented a crisis involving significant aggression from China against Taiwan, while the second presented a crisis surrounding a potential Chinese acquisition of dual-use technology from a fictitious European company.

Insights from the scenario exercises include:

1. China may be willing to deploy the widest range of coercive economic tools in response to a geopolitical conflict.
2. While both China and the United States may be willing to accept negative economic impacts to pursue geopolitical objectives, both also demonstrate a preference to broadly retain access to the other’s market, which may constrain the use of the most extreme forms of economic coercion.
3. Countries other than the United States may be more reticent to take coercive economic actions against China due to fears of possible negative economic and political consequences.
4. The United States may be advantaged by its alliances.
5. Persuasive rather than coercive tactics may best improve the United States’ negotiating position when it seeks to use economic statecraft to manage geopolitical tensions

Based on these insights, report authors Emily Kilcrease, Director of CNAS’ Energy, Economics, and Security Program, Rachel Ziemba, Adjunct Senior Fellow, and Emily Jin, Research Assistant, propose a new framework of using coercive economic measures based on the strategies of joint pressure and bound engagement.

United States use the strategy of joint pressure -- coordinating its responses with partner countries -- to maximize pressure on China, strengthen the ability of the United States to impose costs, and minimize China’s ability to retaliate. The authors also recommend a strategy of bound engagement, by which it engages in economic escalation in a manner bound by constraints embodied in domestic and international rules and norms.

For more information or to schedule an interview with the authors, please contact Sydney Simon at [email protected].