It is hard to describe how unusual this letter is. Teddy Roosevelt famously described how he liked to “speak softly and carry a big stick.” Trump’s preference instead appears to be to make loud threats that he may not be able to deliver on.
Trump is getting very excited about sanctions
The background to this threat is that Trump seems to have recently discovered America’s sanction power. In his impromptu news briefing with Italy’s president Wednesday, he had a lot to say about the “newfound economic power of the United States.” In Trump’s description: “The United States has tremendous economic power. Far more power than playing around with having a few soldiers shooting each other at the border. … The power we have with sanctions and tariffs is far greater than what we are talking about.” Trump’s belief that he can destroy Turkey’s economy seems to be based on a newfound faith in sanctions and tariffs as an instrument of economic coercion.
Of course, Trump has liked tariffs for a long time, but he has usually seen them as a way to make purely economic threats, to get the United States a better deal on trade. His threat of sanctions may not be very plausible: His comments at the news briefing suggest he isn’t particularly worried about what Turkey does to the Kurds. However, his discovery of sanctions as a new toy to play with may have long-term repercussions.
Trump’s understanding of sanctions has some gaps
As we describe in our recent article on how the United States has “weaponized interdependence,” U.S. sanctions can indeed do a lot of damage to other countries’ economies. The United States has unparalleled influence in the global economic system, because international banks rely on the U.S. dollar. This allows the United States to issue sweeping sanctions against institutions, individuals and even entire countries, and to threaten that any banks that fail to apply these sanctions will have access to the dollar “clearing system” cut off. This — together with U.S. influence over the SWIFT financial messaging service — is what allowed the United States to effectively isolate Iran from the global financial system.
However, there are limits to U.S. power. As we noted in an article for the National Interest, former policymakers like Jack Lew, who used to be treasury secretary, fear the more the United States uses this kind of power, the more it gives states and other actors incentives to undermine America’s central role in the global financial system. In Lew’s description: “the plumbing is being built and tested to work around the United States. Over time as those tools are perfected, if the United States stays on a path where it is seen as going it alone … there will increasingly be alternatives that will chip away at the centrality of the United States.” Trump appears to have fixated on the power of sanctions to hurt economies, and to not have a strong grasp of how overuse could damage U.S. financial power in the long run.
Turkey is an important test case
It is an open question as to whether the United States could indeed destroy the Turkish economy. Certainly, the United States could damage Turkey’s financial system, and Tuesday’s decision by U.S. prosecutors to indict a major Turkish bank for sanctions evasion has sent ripples of fear through Turkey’s financial sector. However, Turkey’s economy is bigger than Iran’s and far better integrated into the global financial and trade system. It also borders Europe. If the United States sought to impose sweeping sanctions on Turkey, it is highly doubtful that America’s European allies would comply. They are too exposed to possible Turkish retaliation.
Moreover, Turkey has already been thinking hard about how to insulate itself from U.S. pressure. In August, documents were discovered that suggested Turkey wanted to join with Russia in creating financial arrangements that would allow its banks to avoid the dollar clearing system, and the power of the United States. On Oct. 8, Russia and Turkey signed an agreement that they would gradually move toward using Russian rubles and Turkish liras to clear financial transactions between the two countries. Turkey furthermore suggested it would connect its banks to Russia’s alternative to the SWIFT financial messaging service, and adopt Russia’s “Mir” network, which is an alternative to credit card networks like Visa and Mastercard that are subject to U.S. law. It is not clear how far Turkey will go — but it is at the very least implicitly sending signals to the United States that it has alternatives if wide-scale sanctions are imposed.
Empty threats may damage U.S. credibility
It is extremely unlikely that the United States will deliver on Trump’s threat of destroying Turkey’s economy. The risks would be high, and the benefits uncertain. It is, however, entirely possible that Trump’s loud rhetoric and lack of delivery will lead Congress to impose sanctions independently that do damage to Turkey’s economy without destroying it.
The long-term question is whether Trump’s letter will lead to the further undermining of U.S. power. On the one hand, other leaders may decide not to take his rhetoric seriously: He has a track record of making sweeping threats and changing his mind within hours or days. On the other, the lack of consistency may itself do damage to U.S. financial power. The U.S. Treasury and Justice departments have worked hard to build up a reputation for being willing to take action against states or businesses that step over their red lines. The willingness of Trump to erase red lines, reinscribe them with threatening rhetoric reminiscent of a Mafia boss and then erase them again may damage that reputation.
Abraham Newman is professor in the Edmund A. Walsh School of Foreign Service and Government Department at Georgetown University. He is also the Director of the Mortara Center for International Studies.