By Greg Ip

Few presidents have waged economic war as aggressively as Donald Trump. Yet twice now, other countries have effectively waged economic war against him.

A year ago, Trump imposed steep tariffs on China, which then retaliated by restricting exports of rare-earths products that are essential in industries ranging from electric vehicles to aerospace. Trump soon sought a trade war truce.

Six weeks ago, the U.S. and Israel attacked Iran, which then closed the Strait of Hormuz and sent the price of oil, jet fuel, fertilizer and other commodities skyrocketing. This week, the U.S. and Iran reached a cease-fire.

Neither Iran nor even China possess anything like the economic sway the U.S. does. What they do control are "chokepoints" -- China produces 94% of rare earth magnets, and 20% of the world's oil passes through the Strait of Hormuz.

Chokepoints work fundamentally differently from tariffs, and that distinction exposes the flaws in Trump's entire approach to economic warfare.

This is what I learned from Edward Fishman, who worked on sanctions policy in the Obama administration and literally wrote the book on this subject: "Chokepoints: American Power in the Age of Economic Warfare."

Fishman says a chokepoint has three attributes. First, a country or coalition must have a dominant enough market position to swing the supply or price of a commodity or service. Second, substitutes for that commodity or service must be hard to find in the short run (in the long run, everything has a substitute). Third, closing that chokepoint must have asymmetric effects, i.e., hurt your adversary more than it hurts you.

Chokepoints can be physical or economic. Physical chokepoints include waterways such as the Strait of Hormuz or the Bosporus and Dardanelles, which connect the Mediterranean to the Black Sea, and thus Russian and Ukrainian grain exports. Control of that waterway figured prominently in the Peloponnesian War between Sparta and Athens, World War I and Russia's current war against Ukraine.

Fishman says the bar is high for exploiting a physical chokepoint since that usually requires the use or threat of military force. With economic chokepoints, the bar is much lower. As finance and supply chains have globalized, potential economic chokepoints have multiplied, as have efforts to weaponize them.

Because the dollar accounts for 88% of world currency transactions, 55% of international bank claims and 50% of international payments, U.S. control over the dollar-based banking system constitutes a formidable chokepoint. Washington has used it with growing frequency to sanction terrorists, drug dealers, North Korea, and of course, Iran. With the Netherlands and Japan, U.S. control of the technology for producing advanced semiconductor chips has become a chokepoint to slow China's progress. Russia tried to intimidate Ukraine and then Western Europe by restricting supplies of natural gas.

Trump is more committed to economic warfare than his predecessors, but by different means. Sanctions, he believes, are too blunt and overused. Tariffs are quicker, more flexible, and have domestic benefits such as protecting manufacturing and raising revenue.

Yet tariffs don't meet Fishman's chokepoint criteria. Trump assumes other countries will do almost anything to avoid losing access to the enormous American market. But Fishman says the U.S. share of world imports, at 13%, is too small to sway other countries' behavior. With a few exceptions, most can find substitute markets. China's exports to the U.S. fell last year because of tariffs, but exports to the rest of the world more than made up the difference.

This is why cultivating allies is critical to chokepoints: they can turn a moderate economic edge into a dominant one. Ben Vagle and Stephen Brooks illustrate this in their book "Command of Commerce: America's Enduring Economic Power Advantage Over China." They calculate that in 2022, U.S. firms generated 38% of world profits, and its allies another 35%, i.e., 73% in total. China's generated just 16%. In high tech, the U.S. and its allies generated 84% of world profits, China just 6%.

They conclude that the U.S., with its allies, could inflict far more pain on China, by withholding critical technology or market access, than China could inflict on the U.S.

And yet Trump has pursued exactly the opposite strategy by ignoring and undermining allies, such as by threatening Europe with tariffs to seize Greenland and temporarily lifting some sanctions on Russian oil. Except for Israel, he didn't consult them before attacking Iran, and they refused to join the war.

Just as Trump overestimates the efficacy of his own way of economic war, he underestimates the potency of others'. The Pentagon has known for decades Iran might close the Strait of Hormuz, yet seemed unprepared when it did.

Even so, Iran's ability to extract a cease-fire by closing the strait is surprising. Trump himself noted the U.S. gets almost no oil from the Persian Gulf, and as a net exporter of oil and gas, stood to gain from a prolonged period of higher prices and restricted supplies.

Perhaps Trump believes the U.S. can still come out ahead by sharing in Iran's oil or the tolls Iran says it has imposed on ships that transit the strait. Or perhaps Trump just wants lower gasoline prices. "The Achilles' heel of the U.S. in economic warfare is our low tolerance for economic pain," said Fishman.

That said, the story isn't over. Iran may yet overplay its hand. Its military, nuclear ambitions, economy and leadership are all in ruins. Fishman notes that once a chokepoint has been weaponized, vulnerable nations will go to great lengths to neutralize it. Western Europe has found substitutes for Russian gas; Russia, China and Iran found substitutes for the dollar-based payments system; and China is developing substitutes for Western semiconductor technology.

If Iran seeks to keep control of the strait, the Gulf economies will build alternative routes to export their oil and gas while consuming nations will find alternative suppliers or diversify into other energy. And if the U.S. and its allies conclude that Iranian control is intolerable, there is always military force.

Write to Greg Ip at greg.ip@wsj.com

(END) Dow Jones Newswires

April 12, 2026 05:30 ET (09:30 GMT)

Copyright (c) 2026 Dow Jones & Company, Inc.