## The Cost of Geoeconomic Coercion

## Source details

**Canonical URL:** [The Cost of Geoeconomic Coercion](https://www.imf.org/en/publications/fandd/issues/2026/06/the-cost-of-geoeconomic-coercion-jeffry-frieden)

## Other formats

- [Markdown version](/en/publications/fandd/issues/2026/06/the-cost-of-geoeconomic-coercion-jeffry-frieden/index.md)
- [Structured JSON version](/en/publications/fandd/issues/2026/06/the-cost-of-geoeconomic-coercion-jeffry-frieden/index.json)
- [Bundle manifest](/en/publications/fandd/issues/2026/06/the-cost-of-geoeconomic-coercion-jeffry-frieden/bundle-manifest.json)

## Bibliographic details
- Authors: Jeffry Frieden
- Published: June 2, 2026

---

### Overview
- Governments increasingly use economic policies—export bans, financial sanctions, trade tariffs—for noneconomic geopolitical goals.
- Such geoeconomic measures can achieve geopolitical aims without military force, but they entail trade-offs that may make benefits not worth the costs.
- Author: JEFFRY FRIEDEN; publication: F&D Magazine; date: June 2026.

### Historical context: the close connection of international politics and international economics
- Mercantilism (15th to the early 19th centuries) explicitly linked economic and military policy; Sir Walter Raleigh (1618) stated: “Whosoever commands the sea commands the trade; whosoever commands the trade of the world commands the riches of the world, and consequently the world itself.”
- Early 19th century onward: Britain led a shift toward freer trade and financial flows, separating economic policymaking from great-power politics and enabling rapid economic growth.
- Late 19th and early 20th centuries: renewed economic nationalism and colonial competition returned geoeconomics to prominence.
- The Cold War saw economic sealing of the Soviet bloc while Western economic integration grew.
- Late 1980s and early 1990s: end of the Cold War and globalization reduced geopolitical concerns in economic relations.
- Start of the new millennium: expectations that politics and economics would remain separate proved wrong—examples include Western sanctions on Russia, U.S.–China trade conflicts, pandemic-driven supply-chain concerns, and the full-scale Russian invasion of Ukraine.

### Benefits of coercion
- Geoeconomic tools (sanctions, embargoes, tariffs) can:
  - Coerce adversaries without using military force.
  - Impose costs on target governments.
  - Induce domestic pressure within target countries to push their governments to change course.
  - Persuade allies to cooperate in compelling concessions.
- Many geopolitical benefits are intangible and hard to quantify (e.g., national security, isolating an adversary, averting war), complicating cost–benefit calculation.

### Coercion’s costs
- Policymakers should assess explicit economic costs that are more directly measurable than geopolitical benefits.

- Costs to economic efficiency
  - Geoeconomic measures move an economy away from its most productive purposes.
  - Restricting imports reduces access to goods more efficiently produced elsewhere; restricting exports reduces access to profitable foreign markets.
  - Such measures can compromise comparative advantage and reduce productive efficiency.
  - Quote from Keynes: “The community as a whole cannot hope to gain by making artificially scarce what the country wants.”

- Costs to specialization
  - Specialization underpins productivity and growth; limiting market access restricts the division of labor (“The division of labor is limited by the extent of the market.”).
  - More specialized activities are both particularly valuable and particularly vulnerable; losing access to specialized foreign inputs or buyers raises replacement difficulty and economic risk.
  - Diversifying ties reduces vulnerability but can limit efficiency.

- Costs to innovation
  - Smaller or restricted markets reduce incentives for producers to invest in research and development.
  - Conversely, export controls and sanctions can spur targeted countries to innovate to replace restricted inputs (examples cited: Nazi Germany’s development of synthetic rubber and methadone under Allied blockade; more recent increases in R&D in Russia, China, and Iran in response to sanctions).

- Costs to credibility
  - Violating implicit or explicit contracts via sanctions or asset freezes erodes a country’s reputation for reliability.
  - Loss of trust reduces willingness of foreign governments and private firms to enter potentially risky trade, investment, and financial arrangements.

- Costs to domestic politics
  - Gains and losses from geoeconomic policies are unevenly distributed domestically, potentially producing political conflict.
  - Affected businesses may resent winners, complicating policy implementation, reducing credibility, or generating backlash.

### Complete picture and policy considerations
- Geoeconomic policies are often adopted amid immediate geopolitical crises; short-term focus can obscure longer-term economic and reputational costs.
- Key trade-offs policymakers should weigh:
  - Immediate geopolitical gains (including avoidance of military conflict) versus lasting damage to financial or commercial reputation.
  - Reduced incentives to specialize and innovate domestically versus stimulated innovation by targeted rivals.
  - Concentrated domestic winners and losers and consequent political risks.
- Conclusion: Geoeconomic policies are a valuable foreign-policy instrument with potentially substantial benefits, but there are times when costs may outweigh benefits; a clear, comprehensive assessment of costs is necessary to determine net benefits.

*The Cost of Geoeconomic Coercion — F&D Magazine, June 2026.*

---

## Content in this bundle

- **Frieden**
  - [Frieden (Markdown version)](/-/media/files/publications/fandd/article/2026/06/frieden.pdf.md){rel="alternate" type="text/markdown"}
  - [Frieden (PDF)](/-/media/files/publications/fandd/article/2026/06/frieden.pdf){rel="external" type="application/pdf"}

---

_Source: https://www.imf.org/en/publications/fandd/issues/2026/06/the-cost-of-geoeconomic-coercion-jeffry-frieden_