Trump's Dependence on Sanctions Risks a Backfire, Critics Say

(Bloomberg) -- President Donald Trump’s excessive reliance on sanctions and other measures of economic coercion as a primary tool in foreign policy could backfire and cause other countries to turn away from U.S. financial and economic networks, according to a new report.

The U.S.’s increasing willingness to impose financial penalties unilaterally “has sparked an increasing backlash both from allies in Europe and Asia and from adversaries seeking to circumvent the U.S.-dominated global financial system," according to the report issued Tuesday by the Center for a New American Security.

The administration re-imposed sanctions against Iran after Trump pulled out of the 2015 nuclear agreement over the objections of European allies. The administration has vowed not to ease United Nations-backed sanctions on North Korea and has added sanctions against Russia while resisting congressional demands for sanctions against Saudi Arabia.

At the same time, the effectiveness of sanctions as a tool is being undermined by Trump’s seemingly impulsive decision-making on foreign policy, according to former Treasury Secretary Jack Lew.

“By walking away from one international agreement after another, and engaging in other erratic behavior, the administration sends a signal for other countries to reconsider their own ability to reliably predict U.S. policy," Lew, who served under Democratic President Barack Obama, said at a conference in Washington hosted by the policy group.

“Other nations now must wonder whether sanctions relief will come after they comply with a demand for policy change or from an impulsive gesture," Lew said.

The U.S.’s power to impose sanctions has been bolstered in recent years by the strength of the dollar, American banking institutions, technology companies and the broader economy, according to the report. But that power may be undercut in the long run by a rising China and efforts by other countries to circumvent sanctions they view as too onerous.

“Growing alternative economic and financial channels could diminish the impact of U.S. coercive economic measures and allow countries, companies, and entities targeted by U.S. coercive economic measures to partly blunt the measures’ impact,” the report concluded.

To contact the reporter on this story: Daniel Flatley in Washington at dflatley1@bloomberg.net

To contact the editors responsible for this story: Joe Sobczyk at jsobczyk@bloomberg.net, Larry Liebert, Laurie Asséo

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