This chapter continues with the second key substantive domain that affects U.S. foreign policy today: economics. International political economics and globalizing markets are increasingly important to political actors and the public. The relationship between the wealth of the United States and the poverty of other countries is also rising in importance. The United States today finds itself caught between two visions of political economy, each of which has deep roots. Economic liberalism, often translated into capitalism and economic nationalism, also known as mercantilism. Different political parties, public officials, and societal groups “pull” and “push” on these two converging political economies. The chapter also discusses briefly a third type of political economy, socialism. U.S. trade policy has often emphasized economic liberalism, whereas enacted policies have been more closely aligned with mercantilism, specifically in the arena of foreign tariffs. Yet, from this predominant position, the country faces challenges that stem from globalization. Foreign aid represents a significant portion of U.S. foreign economic policy. Even so, the United States does not grant aid without considering its national interests and political motives, further feeding criticism of this program. New justifications for aid come from the post–Cold War era.
Foreign economic policy is intertwined inextricably with security and other foreign policy domains. The military preponderance currently enjoyed by the United States would not be possible in the absence of a productive population, vast natural resources, advanced technology, and commercial links to other markets. As such, the United States also sees itself as a guarantor of the global economic system, continuing to use economic sanctions to punish countries with different interests and government abuses. Boycotts, embargoes, suspension of foreign aid, freezing of assets, and divestment are chief strategies used to punish countries. Smart sanctions attempt to punish a country’s elites and government actors rather than the country’s entire population. On the other hand, policies such as the extension of most-favored-nation status to trade partners are used as carrots or positive sanctions to establish trading relationships beneficial to the United States. Today, U.S. hegemony is no longer as certain in the economic realm as it remains in the security domain. How the United States responds to challenges in trade and aid depends greatly on the political actors and environment surrounding the policy area. At the heart of the challenge lies the continuous debate between economic liberalism and nationalism, where the United States has foreign economic policies of both types.