Yesterday the hard-working staff here at Spoiler Alerts noted one modest upside to Trump’s foreign policy record to date: the absence of catastrophic defeats. This extends to my fears, articulated back in 2018, that Trump was sanctioning away the dollar’s centrality in global finance. The Trump administration has been unabashed in its weaponization of the U.S. dollar to get what it wants. That financial statecraft has not always succeeded, but to date the blowback has not been as great as I have feared.

Henry Farrell and Abraham Newman know an awful lot about weaponized interdependence, however, and they are less sanguine. Writing in Foreign Affairs last month, Farrell and Newman analogized the United States to Athens in the Peloponnesian War (Spoiler Alert: That war did not end well for Athens). They warn, “Washington’s arrogant belief in the inevitability of its power may end up creating the conditions for that power to crumble.”

Why might this occur?

[The] process has already begun. Turkey — a NATO member and U.S. ally that in recent years has come to fear the sting of American sanctions — is working with Russia to build payment channels that allow international trade flows to circumvent the U.S. financial system. The European Union’s new executive is coldly and carefully considering how best to protect the continent from both U.S. and Chinese economic aggression. Even close allies, such as the United Kingdom, are considering rejecting the U.S. demand that they block the Chinese tech behemoth Huawei from building their telecommunications networks. The dollar clearing system is unlikely to collapse, but states and nonstate actors may dig alternative tunnels of exchange that could gradually undermine and replace it. The more domineering the United States becomes, the more incentives its allies will have to resist its domination or defect just when they are needed most. And as the trust of U.S. allies erodes, so will Washington’s ability to project power around the world. ...
Powerful states can build extraordinary collective goods that benefit their allies and themselves: a jointly funded defense league in the eastern Mediterranean, in Athens’s case, or the vast network of relationships that underpins the U.S.-led global financial system today. Great powers also face the pitfall of hubris. They are prone to assuming that their power is a given and that they can therefore treat lesser states with contempt. As these states become more secure and arrogant in their supremacy, subtle forms of imperialism can turn into cruder ones. The missteps of a Pericles can open the way for gross and dangerous demagogues like Cleon, whose recklessness led Athens into disaster. Recent U.S. administrations built far-reaching tools for economic coercion. They never imagined a president who would use those tools to threaten to destroy the economy of a NATO ally or who would revel in how the “tremendous economic power” of sanctions allows him to do far more than “playing around with having a few soldiers shooting each other at the border.”

Farrell and Newman conclude with a stark warning, “The real Thucydides trap facing Washington is less about the inevitability of great-power conflict than about the persistent temptation of imperial power.”

It is hard for me to capture the violently mixed feelings that their argument brings to the fore for your humble blogger. On the one hand, this is a disconcerting warning! On the other hand, this is an essay that combines discussions of political economy, foreign policy and classics of international relation theory, a combination of my favorite topics to teach and research. This is my jam.

On the third hand, there is a factor that I fear Farrell and Newman overlooked, which is time. It is not that I disagree with their prognostication — I share their concerns. The problem is that this reckoning is not likely to come for quite a while, which blunts the impact of their warning.

To go back to ancient Athens, it is worth remembering that as reckless as Cleon was, Thucydides acknowledges that he won a great victory at Pylos, dealing a tremendous setback to Sparta. It took several decades after Cleon’s death — by which time a debased Athenian state was slaughtering Melians and invading Sicily — when it faced its comeuppance. Even then, the last book of Thucydides’ history is all about how Athens’s enemies were nonetheless unable to fully exploit Athenian weakness.

Farrell and Newman might be right about the new European Commission’s determination to carve out some independence from the United States. As Alan Beattie noted in the Financial Times last week, however, that does not necessarily count for much. European efforts to bypass U.S. sanctions on Iran have not worked out. As for competing with the dollar: “[Europeans] talk enthusiastically about the euro eventually replacing the dollar as a primary currency for bank funding and trade invoicing, undermining the U.S.’s ability to weaponize the payments system for its own ends. But the European currency has its own weaknesses which prevent it playing that role and seem unlikely to be fixed for decades.”

Beattie is not wrong. It is amazing to consider that in the decade since I first wrote about this concern, the two most obvious alternatives to the dollar — the euro and renminbi — are in worse shape. This gives U.S. officials even more time and opportunity to abuse the dollar (not that this will yield much in the way of concessions).

Again, Farrell and Newman are not wrong, but they probably will not be proved right for a good long while. It is harder to persuade government officials to heed warnings when the calamity seems a long way off. For a variety of reasons, a frontal assault on the dollar will take time to emerge.

The United States increasingly resembles Athens in its decadent phase. But it took a long time for that Athens to face its reckoning. And we have a president with an attention span too short to consider the long run, even on financial questions. The Trump Trap is simple: failing to realize that just because bad things have not happened yet does not mean they will never happen.