Which chokepoint wins in a game of geoeconomic Top Trumps?

Imagine a deck of cards, each illustrated with a different instrument of economic warfare. Examples include export controls, financial sanctions, and the one currently giving commodity traders nervous breakdowns: halted traffic through the Strait of Hormuz. Each weapon is assigned three scores: one for economic potency, another summarising the scope for self-harm and a third for durability. Call the game Top Trumps: Chokepoints edition.

Start with marine bottlenecks, by which we mean the canals, straits, channels or seas that ships pass through. A study by Lincoln Pratson of Duke University counted 13, estimating that in 2019 roughly four-fifths of the world’s trade flowing between non-neighbouring countries passed through one.

In most cases, the economic damage score associated with choking off these routes would be a lowly two or three out of five. Closing the busy English Channel, for example, would lead trade to reroute around the top of the UK taking several days longer. Closing the Strait of Gibraltar, the Suez Canal or the Bab el-Mandeb strait (connecting the Red Sea and the Indian Ocean) would add as much as a month to some journey times. But ultimately ships should find other paths to their destinations.

The Danish straits, the Bosphorus Strait and the Strait of Hormuz are different: they lead on to cul-de-sacs, which minimises the opportunities for rerouting. When Pratson analysed the top items at risk from clogging, two stood out: in 2019 the Bosphorus Strait supplied 11 per cent of cereal supplies, while the Strait of Hormuz handled some 14 per cent of the world’s trade in mineral fuels by value. So they get economic damage scores of 4/5. And commodities traders do now deserve sympathy.

Why not 5/5? Partly because there are other sources of energy out there and also because as weapons go, it’s not very well targeted. Analysts at Goldman Sachs predicted the effects of oil rising to $100 a barrel would slow global growth by about 0.4 percentage points, but also that the losses for energy importers such as the euro area, the UK and India would be at least double the size of those in the US — and that’s the nation dropping the most bombs.

Other chokepoints get lower damage scores because they can be wriggled around. Edward Fishman, author of Chokepoints: How economic warfare is changing the world, confirmed that Britain’s seeming monopoly over shipping insurance should fall into that category, because of how both Russia and Iran found ways of coming up with (admittedly imperfect) substitutes after sanctions restricted their access in the 2010s and 2020s.

In this game, monopoly power matters. Over the 2010s, for example, a group of economists estimated that the western coalition powers went from supplying 94 per cent of Russia’s financial services to more like 84 per cent. And over that same period, their measure of the sanctions’ power over Russia approximately halved. Damage score: 2/5.

Explicit export controls on goods and services might be punchier. Some European Central Bank economists estimated last year that were the Chinese to play their best hand, the hit to spending would be 0.3 per cent in the US and 0.4 per cent in the EU. I’ll score the damage associated with those at 5/5, accounting for the risk that switching away from Chinese components is harder than assumed. Boldly, they reckon the hit to a Chinese bloc from western controls would be even larger, hitting spending by about 1.4 per cent. Another 5/5.

The most powerful economic weapon in the world is no good if it blows up the weaponiser too. Shutting down the Strait of Hormuz hurts Iran’s oil sales. And funnily enough, taxing one’s own imports doesn’t come cheap either. The Yale Budget Lab has estimated that the Trump administration’s latest set of tariffs is likely to hurt US GDP by about six times as much as it will damage the rest of the world. Both get high blowback scores of 4/5.

Durability matters too, or the risk that in using a weapon, you push the target to undermine its power. These are the most controversial scores of all. How long will the dollar’s primacy last? Will the Chinese wean themselves off western chip technology faster than the west can crack China’s dominance in rare earths processing? Geography is lasting and ship teleportation isn’t an option, but what if we could wean ourselves off seaborne fossil fuels?

I’ll hand out lots of high durability scores for now, but not before noting some players’ efforts. Jesse Schreger of Columbia University shared findings that after being hit by an export control, Chinese companies were twice as likely as American ones to invest in research and development. In this game, the scores could change.

[email protected]

@SoumayaKeynes

The Economics Show with Soumaya Keynes is a podcast from the FT bringing listeners a deeper understanding of the most complex global economic issues in easy-to-digest weekly episodes. Listen to new episodes every Friday on Apple, Spotify, Pocket Casts or wherever you get your podcasts