This is what all-out economic warfare looks like

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Chad P. Bown is the Reginald Jones Senior Fellow at the Peterson Institute for International Economics, and the co-author, with Soumaya Keynes, of the new book How to Win a Trade War: An Optimistic Guide to an Anxious Global Economy.

Iran weaponized international commerce by closing the Strait of Hormuz at the end of February. Policy makers globally faced unexpected new worries, in light of Iran’s powerful response to the American and Israeli military attacks. Most pressing was how Iran’s actions would affect their economies. But then came a harder question: In a suddenly scary era of trade warfare, what else could be weaponized?

Iran’s richer but vulnerable neighbours had to scramble to maintain access to basic food. Qatar, Bahrain and Kuwait are reliant on imports for more than 80 per cent of their daily calories. With the region’s unforgiving climate, the dependence is over 60 per cent for Saudi Arabia, Iraq and Oman. Since massive ships loaded with these staples could no longer make it through the Strait, many Gulf countries essentially became landlocked. The vast majority of maize, soybeans and rice would need to come in some other way.

Closing the Strait also cut off these other Gulf countries’ energy exports to the world. In total, 25 per cent of globally shipped oil and 20 per cent of liquefied natural gas exports went through the Strait in 2025. Iran’s actions stranded much of this supply for months, unable to be rerouted until new pipelines and port infrastructure could be built.

Asia was among the first to come under economic attack, as it had been the destination for 80 per cent of that outbound oil. Countries without large reserves to draw down feared shortages and inflation. On March 3, Philippine President Ferdinand Marcos, Jr., revealed that the country had only 50 to 60 days of oil stocks, and Philippine consumer prices jumped 7 per cent in April, up from 2 per cent just before the war began. (Richer countries like Japan and South Korea have suffered less so far, having been able to blunt price increases by releasing from their much larger reserves.)

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Though farther away geographically and a net oil exporter, Canadians have still been affected. Canadian energy prices were up 19 per cent in April from a year earlier, in part because oil prices are set on global markets. More expensive gas hurts Toronto’s commuters, and the rising price of diesel has stung lobster harvesters around the Gulf of St. Lawrence. Canadian farmers also face higher costs, as 20 to 30 per cent of global fertilizer exports have been caught up in Iran’s blockade. While overall consumer prices in Canada have ticked up only slightly so far, worries about inflation led Bank of Canada Governor Tiff Macklem to warn in early May that “monetary policy may need to be nimble.”

For policy makers everywhere wondering about their vulnerabilities to all-out economic warfare, Iran’s narrow waterway is not the only trade infrastructure chokepoint. Consider next what arrives by air.

Shortly after Russian President Vladimir Putin ordered a full-scale invasion of Ukraine in February, 2022, Russia closed its airspace to European airlines. Finnair’s share price immediately fell by nearly 20 per cent, as its shortcut flight over Russia to lucrative Asian markets disappeared. Suddenly, starting in Helsinki required detouring all the way around Russia, lengthening the travel distance by 15 to 40 per cent. (In 2023, Finnair reduced its newly unprofitable Asian routes nearly by half.) Lufthansa, Air France and KLM also each cut back owing to higher fuel and labor costs of the longer distance.

Economic warfare creates winners too. China, for example, appeared to cash in on Russia’s discriminatory airspace ban. Permitted to fly the shorter route over Russia, Chinese airlines expanded flights to Europe by 21 per cent between 2019 and 2024. Japanese carriers fear their relative disadvantage could get worse. Tokyo’s current diplomatic flap over Taiwan has Japanese airlines worried that Beijing might also ban their use of Chinese airspace to get to Europe, in addition to flying around Russia.

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Disrupted air routes can also hurt public health. In 2025, more than 30 per cent of the value of global trade was carried out by air, with 11 per cent of that involving healthcare and pharmaceutical products. (Particularly important is that 72 per cent of all trade in vaccines is shipped by air.) Iran’s attacks on airports in Dubai and Doha in 2026 created fear of patients losing access to cancer therapies, insulin and biologics that required fast, cold-chain transportation logistics often only available by air.

Adversaries can cut off essential medicines in other ways. China sends massive amounts of starter chemicals to import-dependent India, whose world-class pharmaceutical companies manufacture them into low-cost drugs that get distributed to patients and hospitals all over the world, including in Canada. Yet, India and China have disputed their Himalayan border since the early 1900s; their most recent military skirmish in 2020 left soldiers dead on both sides. If physical fighting escalates to a Chinese export ban, chemical shortages in India could shrink the global availability of generic drugs, a product class prone to shortages and supply-chain disruptions even during peacetime.

Economic warfare could expand to other types of services trade. Imagine an adversary slashing undersea internet cables faster than the limited number of aging repair ships could reconnect them. (The Baltics and Taiwan faced a spike in severed cable incidents in 2024 and 2025, with Russian and Chinese ships often suspiciously nearby.) Military communications between allies are cut off, websites go down and once instantaneous transactions are suddenly delayed, calling into question the reputation for fairness of countless financial markets.

Furthermore, the Internet of Things revolution connected loads of smart devices to the web, allowing access to companies half a world away. With trusted trade, staff could fix problems remotely and cheaply. And over time, the IoT moved beyond Apple watches and smart toothbrushes to critical infrastructure for entire countries.

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What if those internet connections become a target of economic warfare? Ransomware infections and cyberattacks arise, or worse, what if the devices were built with hidden backdoors, facilitating surveillance and industrial espionage? With a remote kill-switch, an adversary could cut off a country’s pipelines or electrical grid in the middle of winter, freezing entire populations.

Norway just showed how its network of public buses, outfitted with Chinese software, could be controlled from afar. Imagine Keanu Reeves and Sandra Bullock in Speed, but instead with the Dennis Hopper character simultaneously and strategically halting hundreds of city buses all at once, creating a national emergency by immobilizing police, fire, ambulance and services in one giant traffic jam.

Even short of these Hollywood scenarios, this new era of economic warfare is already changing norms. The rules-based trading system largely benefited from free navigation of the seas. One plausible settlement with Iran involves a truce whereby Tehran reopens the Strait of Hormuz but demands multimillion-dollar tolls for passage by ships from unfriendly countries. (Similar to the discriminatory Russian airspace ban, China’s “friendly” ships would get a trade preference by not having to pay a toll.)

Of course, Hormuz is not the only strait. In April, the Indonesian Finance Minister seemingly joked that his country might contemplate tolls on the nearby Strait of Malacca, through which even more oil transits than Hormuz. (The next day, Indonesia’s Foreign Minister felt the need to distance the country from the joke, saying that there were no plans for tolls.) Furthermore, a new Arctic passage between Canada and Russia may someday be a cheaper and quicker way to get cargo ships from Asia to Europe. If that happens, imagine a social-media post by those periodically unfriendly Americans musing flippantly about imposing a toll at the Bering Strait.

In an era of economic warfare, these jokes are no longer funny.