The danger of trading blows with your best customer

Let me state the matter plainly. According to CNBC, the United Kingdom has moved forward with sanctions on Israeli settlements in the West Bank, and U.S. officials have warned London of potential economic consequences for doing so. Two of the world's most commercially intertwined democracies are now threatening each other's trade — and the question I must put to my readers is this: who benefits from that quarrel, and who pays the cost?

The answer, in any era, is the same. The traders pay. The bondholders pay. The workers in the factories and ports pay. The governments collect the theater of confrontation, and the citizens absorb the bill. I built American public credit on the premise that confidence is fragile and must be tended with almost fanatical care. A sovereign that reaches for economic coercion against a trusted partner signals to every creditor and every commercial partner that it will subordinate long-term commerce to short-term political pressure. That signal is expensive.

I will not pretend to settle the underlying dispute over West Bank settlements — that is a matter of diplomacy, of international law, and of moral judgment on which I hold my opinions with appropriate humility given that I did not live through the twentieth century, let alone this one. But I know something about the instrument being wielded here. Sanctions and trade threats are financial weapons. Deployed against an adversary, they may serve the national interest. Deployed against an ally whose capital flows, whose bond markets, and whose currency reserves are woven tightly into your own — they are a loaded pistol in a crowded room.

The American commerce power was designed, in my reading, to build a national market and to project commercial strength outward. It was never intended as a cudgel to discipline friends into political agreement. When you threaten a partner's economy to change its foreign policy, you are not exercising strength — you are advertising the limits of your softer persuasion. And you are teaching every other ally precisely what the cost of independence from Washington might be. Some will submit. Others will begin, quietly, to diversify away from dependence on American goodwill. Neither outcome is a victory for American commerce.

The better instrument is negotiation — direct, energetic, frank. If the United States believes Britain's sanctions are misconceived, make that case in the councils where such things are decided. Threaten tariffs in public and you give the British government a domestic-politics gift: nothing unifies a parliament faster than a foreign power threatening its economy. You will have made the sanctions politically irreplaceable.

My recommendation is direct: the administration should withdraw the public threat, open a private diplomatic channel, and argue the case on its merits. Public credit — and I mean here not merely the credit of treasury bonds but the broader credit of trustworthiness in commerce — is the foundation of national power. Spend it on worthy battles, not on coercing allies who are acting within their sovereign rights, however one assesses the wisdom of those acts. A nation that will not pay its diplomatic debts in persuasion will eventually find the interest rate on its goodwill very steep indeed.