Thucydides' Trap: The Role of Bello-Economics and Probability of War

Two Sides of the Same Relationship

As the world has become a more globalized place, the facets of warfare have expanded. New domains and frontlines have developed, while others are still nascent. In short, even though human warfare seems to perpetually persist in field combat, reflected in the role of the Russia-Ukraine war, still ongoing¹- the novel frontiers of war seem even more prominent. The form of chokepoint war, as established through the economic constraints of the United States (US) on Russia, Iran, and China, established a financial front for conflict². Critical minerals and microchips serve as another facet³; cyberwarfare utilizes cyberspace as a field of battle like never before⁴; as does the not-yet actualized role of the Arctic, deep sea, and space.⁵

Where there is leverage, there is war. There will perpetually be parties working to utilize the weaknesses of others and dependencies upon them to their advantage. This is not traditionally dubbed as war; nonetheless, it is a form of contest between powers to attain further leverage- it is the utilizing of power to make another do what one wishes.⁶ Fundamentally, war. Be it with infrastructure, debt, or troops, new forms of war are being conducted constantly by nations.

Correspondingly, the dangerous balance of rising and present powers has leaders of the US and China meeting and asking how to escape their Thucydides Trap- as reflected in the May 2026 Trump-Xi summit in Beijing.⁷ These two factors lead to a clear intersection- the question of how such new fields of war change the likelihood of the outcome of true, physical conflict. The US has, since 2022, stayed out of Russia's siege upon Ukraine, providing some financial and material aid instead.⁸ The US instead provided economic pressure on Russia through sanctions, Society for Worldwide Interbank Financial Telecommunication (SWIFT) restrictions, and the freezing of Russian government-affiliated billionaire funds.⁹ The battleground shifted from physical to financial; such a course of events was mirrored in the pressuring of Iran economically to strike the Joint Comprehensive Plan of Action (JCPOA).¹⁰ Despite this, a physical war with Iran was initiated to attempt to force a different deal¹¹, as well as US military operations serving in the capture of Venezuelan president Maduro.¹² As such, military and economic warfare have been used alike in recent US foreign policy. China tells a similar story, wherein the Chinese military applies pressure throughout the Taiwan Strait, the Philippines' Batanes islands¹³, as well as financial pressure on those indebted through programs such as the Belt and Road Initiative (BRI).¹⁴

The question at the heart of the world's transition is this: Does the role of different forms of warfare, particularly financial/economic warfare- increase or reduce the likelihood of physical conflict between the US and China? This article will attempt to answer such a question by analyzing Chinese and US military policy as well as economic policy regarding hostile parties, the role of hotspots such as Taiwan, and the establishment of trade relations between the nations. This article will utilize the concepts of power and legitimacy¹⁵ to determine which action is most beneficial for each nation- and then, by analyzing the outcome for each nation, reconcile the outcome for the world. This article will also utilize the notion of Copeland's theory of economic warfare¹⁶ to analyze the role of economic war in a Thucydides Trap.

Competition breeds innovation, and as such, there is great benefit from healthy competition, although there is a great cost from unhealthy competition: war. The costs of war and the benefits of competition walk a thin line; despite that, the 2026 Trump-Xi summit ended with what appeared to be a mutual understanding of a shared goal.¹⁷ That goal is dubbed “constructive strategic stability”, effectively the alliance of the US and China to prevent a catastrophic conflict between them, as reflected in Graham Allison's model of Thucydides' Trap, the very term mentioned by name by Xi Jinping at the May summit.¹⁸ What goes beyond such a model of non-violence would be a pact of healthy competition, the retention of tension between the nations not to spiral into war but instead to soar higher because of the adversity. In other words, to artificially grow innovation through organic competition.

Despite the optimistic approach the nations adopt, it lacks the practical application of a treaty, offering only the appearance of unity among leaders. Such unity does not stop the lower agencies within each nation from acting in their own small wars. Espionage, for example, is not predicated particularly on the President of the US or the Secretary General of the Chinese Communist Party (CCP), although such leaders may guide policy. The fact that the nations, not simply their leaders, wish to either remain in power or take the throne is not predicated by the actions of leaders.¹⁹ What it is guided by, however, is reasonable deterrents or rewards; carrots and sticks.

The current carrot is negative reinforcement, the withdrawal of economic conflict, be it in trade, finances, Foreign Direct Product Rules (FDPRs), SWIFT restrictions, account freezes, or otherwise; put simply, bello-economics.²⁰ Bello-economics is distinct from a traditional embargo in terms of application and withdrawal; as both function as signals, a cycle of pressure and relief which indicates to the targeted state something about the trajectory of its future access to the globalized world; markets, capital, and technology. It is this dynamic Dale Copeland identifies as the driver of whether economic independence restrains war or hastens it.²¹ The relief of such a form of pressure is greatly appealing to the businesses and economic power of China. Such brings forth the first notion: the argument for war, due to bello-economics.

Bello-Economics: The Rationale for War

Respond to force with force; that is a fundamental proposition of war, to not let the enemy make demands and execute punishments without resistance.²² Such resistance is imperative to avoiding surrender; as such, if bello-economics continues to be applied to China by the US, resistance is to be expected. In such a case, economically or physically.

Resistance to coercion is not necessarily escalatory; however, the determination of its extent, whether it remains purely economic or manifests kinetically, depends upon the target retaining reciprocal leverage over the coercer.²³ In short, it is a two-way road; the US can pull upon the Chinese economy, but such an action goes both ways. This has already played out in the role of 145% tariffs placed on China by the US; in return, China restricted critical minerals to the US.²⁴ Such leverage tends to keep conflict isolated to the economy because it has a deliberate response. Were such a response absent, different outcomes become clear.

Iran

The US applied incredible economic pressure through sanctions on Iran up to 2018, wherein Iran's ability to impose equal costs on the US faltered.²⁵ Iran's economic arsenal could not touch the US the way the US economy was able to strike Iran's, particularly due to the importance of US supply chains.²⁶ Resistance therein took the form of a nuclear program's escalation as to economic retaliation-in-kind. Economic resistance turned kinetic, escalating in the one realm where escalation remained possible.²⁷ The response resulted in direct military strikes because Iran had no other options; and so should China find itself in a similar position, physical conflict becomes likely. Bluntly put, sustained bello-economic pressure without a reciprocal channel eventually produces kinetic escalation; this is not, however, purely due to a timeline, constant bello-economic pressure sustained over 30 years may not result in the same outcome if it is reciprocated; it is the fact that it is asymmetric that sparked the military response from Iran. This maximum-pressure economic campaign was sustained for six years before strikes occurred.²⁸

China

In this situation, China maintains reciprocal leverage, as seen with the rare earth metal restrictions in response to US entity-list actions and export controls; kinetic conflict decreases.²⁹ The strategic deployment of bello-economic policy from Beijing in the critical mineral and rare earth export controls was deliberately aimed at US defense infrastructure and semiconductor supply chains; it was not military escalation.³⁰ The semiconductor conflict between China and Taiwan has not manifested into an invasion of Taiwan or destruction of Taiwanese semiconductor infrastructure despite trade conflict, for example. If bello-economics purely encouraged conflict, such as in the Iran case, one would anticipate strikes upon Taiwan from China. Fundamentally though, this is unreasonable; legitimacy internationally trumps power alone.³¹ Iran had long lost international legitimacy, and US bello-economics retained legitimacy by not physically engaging Iran, while still applying power.³² The same is true for China and Taiwan; the loss of legitimacy by conducting any strikes is not worth the potential show of power; it would also likely harm China through its dependence upon Taiwanese microchips. Once again, bello-economic power is often a two-way street.³³ Resistance which is channeled into the bello-economic domain prevents conflict because it provides a more legitimate option than physical warfare.

Russia

Since 2022, Russia has been forced to absorb SWIFT restrictions, frozen assets, and sustained sanctions³⁴, and has not initiated direct conflict with the US. This makes Russia a stability case in one specific sense only: no kinetic war exists between Russia and the US as a result of bello-economic pressure. It is not a stability case for bello-economics as a deterrent to war more broadly, since Russia has maintained active kinetic war with Ukraine throughout the same period. Bello-economics did not stop that war, and did not meaningfully constrain Russia's willingness to start or sustain it; the case therefore shows that sanctions can suppress escalation between the sanctioning power and the sanctioned state without suppressing the sanctioned state's willingness to fight a third party. This is likely because there is a sunk cost of legitimacy in waging war, and succumbing to outside influence weakens the perceived power of the state³⁵; the incentive not to escalate against the US specifically does not transfer to Russia's conflict with Ukraine. Additionally, war is innately a costly endeavor; unexpected costs may strain the domestic economy further than anticipated, but that cost is inherent to war regardless of sanctions. Russia has also adapted to sanctions pressure through shadow fleets and yuan settlements³⁶. This adaptation response carries its own message: nations may insulate rather than respond with force when they cannot respond in kind. Insulation is far less costly in terms of power and legitimacy than surrender, while still allowing the nation to function; adaptation is at least as common as escalation. Russia therefore serves as a narrower example than it's sometimes used as: a nation engaged in active kinetic warfare that has nonetheless avoided further kinetic escalation with the US specifically on the bello-economic front. That distinction, US-directed stability rather than general peace, is the version of the claim that should carry through the rest of the paper³⁷

Venezuela

At times, however, bello-economic policy simply falls flat. Venezuela provides the most pointed case of this. Force has a presence in the modern, globalized world, despite the persistent utility of economic warfare. Sanctions placed against the Maduro government since 2017 slowly accumulated over the following decade³⁸; despite this, the pressure campaign ended not in a negotiated settlement but instead in the direct capture of Maduro by US forces in January 2026.³⁹ Use of force where sanctions would not suffice; where the domineering power acted violently rather than the received power. This differs directly from Iran in this way, due to a mechanism of failure: the Brookings post-operation analysis indicates not that Maduro lost patience and tolerance for the sanctions but instead that, like Russia, he adapted to evade the sanctions.⁴⁰ Thus the power held by the coercer was eroded, and as such faith in economic tools to win the war alone. This is not pressure accumulated, then sparking into war; instead, it is an indication that some cases exist wherein the expectation of achieving a goal purely through bello-economics continually declined, thus pushing Washington towards a more kinetic option. In short, bello-economics, when failing, can lead to physical involvement. Bello-economic power kept declining, and Venezuela had no reciprocal economic leverage over the US; hence, once the adaptation strategies stopped being sufficient on their own, there was no further bello-economic escalation left available to either side. Washington had the next rung on the escalation ladder, and utilized it to seize the nation's president.⁴¹ There are, therefore, four obvious outcomes of bello-economics: (1) reciprocation and retaliation in the same medium, (2) evasion, (3) erosion leading to action, (4) the forcing of physical action as last resort.⁴² The mechanical difference between the two is which side runs out of options first: in erosion, the coercer's own bello-economic tool loses effectiveness, and it turns to force instead; in forcing-as-last-resort, it is the target whose economic options are exhausted, and physical resistance becomes the only channel left open to it. In two of these four, there stands no alteration, no physical metastasizing of conflict; in the other two, however, the last resort of violence is utilized. The key difference therein is which power utilizes violence and why. In Venezuela, it was the erosion and ineffectivity of bello-economic power; in Iran, it was due to the incredible effectivity of bello-economic power, forcing resistance to actualize physically. As such, the utility of a bello-economic channel is imperative. Iran and Venezuela lacked that channel, and both saw kinetic outcomes. China and Russia retain it: China through rare-earth and critical-mineral leverage over US defense and semiconductor supply chains⁴³, Russia through sanctions evasion that keeps its own economy functional without needing to strike back⁴⁴, and both have stayed within the bello-economic domain. Russia's case is bilateral rather than general, however: it has stayed within the bello-economic domain specifically toward the US, even as its kinetic war with Ukraine continues over the same period. This is the claim the rest of the paper tests: not that thirty years of bello-economic pressure will eventually produce war, but that pressure sustained without reciprocity does.

This logic cuts both ways. If China closes the gap identified above and becomes the insulated, leveraged side of the relationship while the US becomes the structurally exposed one, the same mechanism that spared China and Russia a kinetic outcome would place the US in the position Iran and Venezuela occupied: the side with no reciprocal channel left to draw on. Dual circulation, examined in Section VI, is precisely the mechanism by which China could engineer that reversal.⁴⁵

Theoretical Framework

Graham Allison's Thucydides' Trap supplies this article's starting condition rather than its explanatory mechanism.⁴⁶ The logic that a rising power's structural challenge to a ruling power “magnifies misperceptions and multiplies miscalculations” exhibits an explanation of the dangerous, precarious nature of the US-China relationship.⁴⁷ However, it does not predict which pressure-response cycles stay economic and which evolve into kinetic warfare. That work falls instead to power, legitimacy, and Copeland's trade-expectations theory, combined.⁴⁸ This paper also draws on Modelski's long-cycle theory, which holds that world leadership shifts in roughly century-long cycles punctuated by global wars that reorder the system.⁴⁹ Modelski distinguishes challengers already seated within the existing order from outsider challengers who reject its legitimacy outright; historically, only the latter have required a global war to displace the incumbent power.⁵⁰ That distinction supplies the test the later sections apply to China: whether it is rising as an insider bidding for a larger share of a system it was born into, or as an outsider seeking to overturn that system altogether.

China has, for years, followed Rush Doshi's model of biding its time while amassing strength.⁵¹ As the country once treated as a lesser power has expanded its global influence and risen to parity with the US, it has benefited from a facade of accepting the existing world order, avoiding a Thucydides' Trap while still working to surpass the US within it.⁵² But that strategy depends on a successful transition of power: one where China does not lose legitimacy or standing, and does not shake the world order so violently that it undermines its own position. War, in this frame, is not simply self-defeating by default; a US-China war would be destructive to both sides, but that destructiveness alone isn't what restrains China. What restrains it is that confrontation would cost it the legitimacy it needs the world to grant it once it does surpass the US, and even a hegemon's wars, including the US's own, measurably reduce international legitimacy.⁵³ China's own civilizational self-conception, moreover, has historically resisted the Westphalian legitimacy model the US-led order assumes, which sharpens the stakes of that legitimacy question rather than resolving it.⁵⁴ This paper uses the Kissinger model of legitimacy alongside Organski's model of power⁵⁵ to name a pattern already visible in the case studies above: the US has avoided overt strikes on Iran's economy, and China has avoided striking Taiwan despite holding clear military superiority.⁵⁶ In both cases, the legitimacy lost to an overtly kinetic act outweighs the power gained or demonstrated by it. Bello-economics is therefore not merely cheaper than war; it is a viable form of pressure that lets a state apply force without forfeiting legitimacy. Espionage and sabotage have served a similar function historically, but both carry legitimacy risk if exposed; they are a gamble. Bello-economics carries no equivalent exposure, only the risk of retaliation.

Copeland's trade-expectations theory tethers these notions, arguing that war probability tracks the state's expectations of future trade access as opposed to a present level of interdependence.⁵⁷ High current interdependence paired with pessimistic expectations about its trajectory is more dangerous than low interdependence, because it is the anticipated loss of access, not present dependence itself, that pushes a rising or declining power toward force.⁵⁸ This is the variable identified in the case comparisons above: Iran's and Venezuela's expectations of future access collapsed with no reciprocal tool to arrest the decline, while China's and Russia's have not, because both retain a credible threat to the coercer's own future access. However, the relationship between the US and China is unique in that the interdependency plays the role of nuclear weapons in the Cold War; mutually assured destruction, physical conflict between the nations disrupts the world economy, and the global order. The solution, therefore, is a non-violent form of war: bello-economics. From this, two competing hypotheses follow, and the remainder of the paper is organized around adjudicating between them: the substitution hypothesis holds that cycles of bello-economic pressure and relief leave expectations of future access stable or improving over time, functioning as a genuine release valve; the escalation hypothesis holds that each cycle leaves expectations of future access measurably lower than the one before, a ratchet, functioning as a second, parallel track of conflict rather than a substitute for one.⁵⁹

Dual Circulation: China’s Shield

China possesses a unique shield for bello-economics: dual circulation. The Chinese dual circulation strategy (DCS) is viewed simply as China's decreasing dependence on external requirements and foreign technology inputs by strengthening the domestic internal circulation loop.⁶⁰ Consumption, innovation, and self-sufficient supply chains exist within the borders of China, while resources are sold outside the nation; in short, China can feed itself and starve out the world if such a strategy is enacted in its entirety. This insulates the Chinese economy from US chokepoint access.⁶¹ This is a direct response to the experience of being on the receiving end of US bello-economic tools, rather than a growth strategy which coincidentally holds defensive effects.⁶² The fact of the matter is that China possesses a strategy that is deliberately insulated specifically from bello-economic policy. DCS is therefore not a bid to exit bello-economic competition; rather, it is the shield to win that very kind of competition. A nation does not build a shield if it does not plan on going to war. A state with falling expectations of future access under the status quo, which adapts, has two direct responses: escalation immediately while it holds leverage, or buy time to build the capacity to make the next round of pressure survivable, and eventually reciprocal on its own terms.⁶³ China may have created DCS as a response to chokepoint pressure, but it is not limited to simply a defensive policy; it is also an indicative policy of strategic awareness of bello-economics. The DCS, then, is this second path in response to the falling expectations of access. Its function is not permanent insulation for its own sake but sequencing: reduce China's exposure to the chokepoints the US currently controls, such as dollar-clearing dependence, foreign semiconductor inputs, reliance on US-linked capital markets, all the while retaining and expanding the chokepoints China already holds over the US, rare-earth and critical-mineral processing being the clearest current example.⁶⁴

Bello-economics is at present relatively reversible and specific; it remains consistent within the Busan Summit, London Framework, and November 2025 rare-earth suspension⁶⁵, but this is because the current asymmetry is leverage against China. China is more exposed in terms of both finances and technology, while the US is exposed to critical minerals.⁶⁶ As such, neither power is perfectly capable of controlling the outcome of a large-scale economic war. DCS is China's attempt to flee this dynamic before it is leveraged against it in its entirety. The paper's central prediction follows directly: restraint should hold for as long as China remains dependent on systems the US can credibly threaten, but as DCS closes that gap, the incentive for restraint weakens specifically on China's side, because Beijing's expectations of future access will no longer depend on US cooperation at all.⁶⁷

In short, a nation with a shield is ready for war; the US cannot afford to ignore DCS as a policy based on economic growth and not on economic insulation.⁶⁸ The US has long held leverage over China in bello-economics; the world economy hinges upon the US dollar. And yet, the US long had leverage over China in many realms; and it has lost that leverage. As China rises eye-to-eye with the US, it enters all confrontations with a new asset: a shield.

Bello-Economics: Release Valve or Additional Front?

This line of reasoning, the importance of a shield, leads to the question at the heart of this article. Does bello-economics increase or decrease the probability of war? Does the economy serve as a dimension of conflict, such as cyberspace, or does it serve as a reason to hesitate, a release valve, from war?

The Release Valve

The strongest case for the argument of a reduction of pressure by circumventing it has been reflected in the relationship between the past two great powers and their competition. The US-Russian relationship has, since February 2022, displayed unique peace.⁶⁹ That peace is bilateral and narrow: it describes the absence of direct US-Russia conflict, not the absence of war, since Russia's kinetic war with Ukraine has run continuously over the same period.⁷⁰ The US has held the conventional deterrence incentive to intervene militarily against a nuclear power invading a partner, it makes reasonable logic for the US to enter Ukraine, and has been through the administrations that were in office throughout the war. And yet, war is costly in terms of legitimacy, not only in terms of resources and manpower.⁷¹ Legitimacy has trumped the need to flex power internationally. Instead, the US response was almost entirely bello-economic: SWIFT restrictions, frozen assets nearing the hundreds of billions in the central bank, and a rolling sanctions regime⁷², paired in tandem with material support routed through Ukraine rather than direct US engagement. To stay above the fight and still help win it; that is the most legitimate strategy possible, and it is exactly the pathway the US has followed. This is a state substituting a costly, expectations-collapsing tool, direct war, for a lower-cost one that still communicates resolve.⁷³

The US record with China posits a more direct test: the Busan Summit of October 2025 and the London framework, a trade truce architecture⁷⁴, both show tariff and export control escalations falling to negotiations rather than inner-state policy. If negotiations can be met, such policies can reflect the deliberate pull or push of the other nation. Chokepoints with pressure applied here may indicate what China wants there, for example. The November 2025 rare-earth export suspension preceding the May 2026 Beijing Summit⁷⁵ is the most recent instance: Beijing relaxes a chokepoint tool specifically to build confidence preceding a diplomatic act. Such an act happened to be discussing evading this Trap. This is the reversibility Copeland's model predicts from a state signaling that it wants the other side's expectations of future access to improve rather than collapse.⁷⁶ It is in this way that bello-economics serve as a backdoor to policy: China can communicate with the US through its restrictions or releases, and diplomatic actions can communicate between the nations; it is the base case for avoiding war. Communication between rival powers, with a healthy exercise of competition, is a solution that can prevent a catastrophic war neither party directly benefits from.

Such a healthy exercise did work once before; the JCPOA-era sanctions relief of 2015–2018 functions as a true release valve of international tension; expectations of future access improved and Iran dialed back its enrichment plans accordingly.⁷⁷ However, the US withdrew from the deal and imposed maximum pressure without a credible re-entry path⁷⁸, squandering the success up until that point. Bello-economics substitutes for war when paired with a credible, reciprocal off-ramp and stops substituting for war when pressure is applied with no expectation or possibility of relief. War is designed to amass power; it exists to influence another power to do what the stronger power wishes. If the weaker power is not able to act in such a way that the greater power wishes, bello-economics are simply unproductive damage, not strategic harm.⁷⁹

The New Front

As such, bello-economics serves as a backdoor that is more tolerable in terms of public perception of power and legitimacy that is lacking in visual, obvious war. Cyberwarfare and espionage function as covert channels of conflict; bello-economics falls within the very same category.⁸⁰ The coercive power of chokepoints comes from the fact that they cannot be quarantined to a bilateral relationship, fundamentally, and are a use of weaponized interdependence.⁸¹ China's economic retaliation against South Korea during the 2016–2017 Terminal High Altitude Area Defense (THAAD) dispute manifested in informal boycotts, restrictions on Korean firms, and tourism curbs⁸²; it displays that bello-economics against a third-party ally as opposed to the primary adversary converts a US-China dispute into a Korean economic crisis. China, in this weaponization of interdependence and of the globalized world order, can expand its warfare outside of debt and trade, into practical economic damage. The gray-zone pressure on the Philippine-claimed Batanes, for example, and BRI debt leverage over recipient states⁸³ extend the same logic outward: the notion that pressure applied to allies and partners cannot be selectively ignored the way a purely bilateral opposition can be.⁸⁴

Furthermore, rare-earth restrictions are still (at the time of writing) an unsettled dispute; there is no equilibrium established. The April 2025 controls, October 2025 tightening, November 2025 suspension, and the unresolved status following the May 2026 Summit⁸⁵ establish a pattern of fluctuations rather than a resolution. Stability and clarity of policy prevent wars more than unpredictable shifts of economic policy.

CSIS's one-year retrospective⁸⁶ and the RFF issue brief on China's incentive to keep restrictions temporary rather than permanent⁸⁷ both suggest Beijing is deliberately preserving the tool for reuse; such posits the clear notion that a clean substitution is occurring. A sword does not stay in the hand of the power that wields it without a reason. At this point, the US and China have shaken hands on peace, but hold swords in their other hand. A release valve vents pressure permanently through policy and diplomacy; certainly no such stability is maintained if instruments of leverage stay in play.

Both the dynamics of a valve and of a new dimension of war are present in the modern competition between the US and China. However, it is not a tie as to which outcome is on a trajectory. Despite the fact that the May 2026 summit claimed growth towards cooperation directly and deliberately⁸⁸, the role that the DCS plays displays practical policy and action; words at a summit do not. Fundamentally, though, the bello-economic battle that rests on the cusp of occurring is still in flux for a reason; the asymmetry of the present battleground keeps the bello-economic tools reversible. China and the US work respectively in an ebb-and-flow policy of bello-economics; some policies remain, others are relinquished.⁸⁹ As such, the present field is one of negotiation, give-and-take, and exchange; it is not a matter of irreversible war or damage. However, should bellicose economic actions be taken that are so destructive, such conflict could arise. China is preparing for this outcome, and in turn preventing it; the US holds the majority of the leverage in the playing field; nonetheless, the DCS is a shift towards protective measures which insulate the nation from American bello-economic policies.⁹⁰ Dual circulation is what closes the gap in this asymmetry, and the completion of it will hinder the likelihood of a release valve and instead shift towards another dimension. This is because once China is free from bello-economic actions taken against it, the cost of striking in the same way is diminished.

That is not to say that dual circulation will lead to war between the US and China, the arguments for a release valve or proxy war, as well as another dimension of conflict, are both still sound. It does, however, indicate that with DCS, the likelihood of a release valve is replaced instead with a proxy war of economies. The sword and shield of DCS and Bello-economics fall directly under the logic of legitimacy and power by preserving the strengths without the cost of appearing illegitimate internationally.⁹¹ DCS is a shield which reduces Chinese exposure from dollar-clearing, semiconductor inputs, and US markets.⁹² DCS costs no international blowback, while it defends against any loss of power from the US. Rare earth and critical mineral exports, entity-list retention and the ability, through DCS, to wait out the opponent provide a sword to pierce the US bello-economically.⁹³ It is a justifiable stance of defense, which is what preserved the US's legitimacy when sanctioning Iran for a nuclear program.⁹⁴ It is easier, in short, to justify retaliation than aggression.

As established above, that same legitimacy-over-power calculus is what has kept China from Taiwan and the US from Iran. Restraint, however, will weaken as the DCS matures, but it does so asymmetrically, with China's bello-economic posture growing visibly more aggressive⁹⁵ while its domestic exposure to US countermeasures shrinks over the same timeframe.⁹⁶ Sword-and-shield does not require China to abandon the language of cooperation; in fact, cooperation in the short term is greatly encouraged because it protects China from strikes while it still develops its systems of offense and defense, while retaining legitimacy.⁹⁷ The tell is not what Beijing says at the next summit; it is whether the restriction floor after the next rare-earth cycle sits higher than the last one at the same time that indicators of Chinese financial and technological self-sufficiency are also rising.⁹⁸ Both trends moving together is the signature of this policy of bello-economics, initiated by the US but quickly being mastered by China.

Reconciling the Outcome

Each nation desires something, each nation fears something; it is this relationship of give and take that defines geopolitics.⁹⁹ For the US, the most beneficial outcome is the one which preserves legitimacy while demonstrating power, sanctions and SWIFT restrictions on Russia¹⁰⁰, maximum-pressure sanctions on Iran as opposed to military strikes¹⁰¹, rolling tariff-and-export control posture in China, as opposed to military confrontation in Taiwan.¹⁰² The US crossed into kinetic action only where bello-economic policy failed, and the trade-off of power and legitimacy was largely retained. That is not to say the US did not blunder in the repeal of the JCPOA deal and that engaging in military action was most costly in both legitimacy and power, merely that the action was taken particularly due to the limited nature of bello-economics.¹⁰³

China follows a similar pattern: passive power through infrastructure, trade, debt, and strategic leverage as opposed to military conquest is vital.¹⁰⁴ Beijing has the military capacity to overtake the Taiwan Strait, and yet has not acted aggressively; the same rings true for the Batanes and BRI leverage over recipient states.¹⁰⁵ Beijing applies pressure, undoubtedly; nonetheless, it retains legitimacy in the way in which it applies this pressure and the world's perception of it. Rare earth export controls let China demonstrate the same resistance military posture would signal, although it did not forgo any international legitimacy required for BRI partnerships.¹⁰⁶ Furthermore, it treats Taiwan as a domestic matter, following the same principles; lastly, China acts bello-economically in terms of response and defense, not offensive aggression. Dual circulation allows this process to be sustainable, rather than costly; evading, the way other nations have, has harmed them and limited their options greatly; China has not evaded, merely responded and established a defense system.¹⁰⁷

These notions reconciled, the outcome for each nation is akin even if the states met from highly different strategic postures. Washington and Beijing both concluded that bello-economic tools maximize the same power as a kinetic posture without the cost of war, the legitimacy decay of aggression, and the same domestic fallout for a loss.¹⁰⁸ Additionally, bello-economic wars don't particularly “end”; there is an ebb and flow to what states can and will do, and some states may accept concessions or succumb to pressure, but the nature of a globalized system is that the road runs both ways.¹⁰⁹

This is not the same conclusion as Allison's constructive strategic stability; conflict between the US and China is fundamental and not resolved simply by a summit agreeing towards cooperation.¹¹⁰ Conflict finds its way out; with the Soviet Union and US, it was proxy wars; in the modern system it is bello-economics.¹¹¹ Conflict escapes into the layer of trade, not troop deployments. The competition remains; it is the arena that differs in this Thucydides' Trap. It is a stable form of competition because it preserves legitimacy for both powers, not disrupting the world order and shaking the delicate boat both nations depend upon. Furthermore, it allows the balance of power to shift accordingly, so that the rising power, when meeting the established power eye-to-eye, can act.¹¹²

The world's outcome, then, is not currently peace in the sense of resolved rivalry; it is displacement of the rivalry into the one domain where displacement was available to both parties on acceptable legitimacy terms. That domain's stability depends on both sides needing to preserve legitimacy roughly equally; however, this condition will erode as dual circulation matures, granting China a sword and shield for war.¹¹³

The answer, therefore, is complex. Nonetheless, it is this: China will develop dual circulation as a shield to bello-economics while still retaining leverage, a sword, to strike the US.¹¹⁴ It serves as a proxy war for physical combat due to its ability to preserve legitimacy. Thucydides' Trap will not be escaped, but it will not act out in a global war which, as Modelski's table posits, will change the world order from an outsider- China is not an outsider.¹¹⁵ The world order will not be changed; however, the power between the US and China likely will- the winner of such a conflict is as of yet undecided. Will dual circulation act as a release valve, or another dimension of war? Likely, it will serve as a dimension of war in place of physical war; one can call such a proxy a release valve in that there is a release of competitive tension which avoids physical war, too costly given mutually assured destruction.¹¹⁶ Does bello-economics increase or decrease the probability of war? Does it antagonize the nations to act in physical backlash? It increases the probability of war if it is unstable, as it was in Venezuela, where it was ineffective¹¹⁷; or Iran, where it left the nation with no other option.¹¹⁸ It decreases the probability of war if this is it is reciprocated, even if in an unbalanced way, such as with the US and Russia.¹¹⁹ It may antagonize nations; however, it holds equal capacity to subdue them; it is a matter of the relative power of each nation in the equation.

In a more globalized world, war has become increasingly unappealing and costly; legitimacy is a more palatable option.¹²⁰ Correspondingly, nations find new ways to fight wars without shedding blood: cyberattacks, technological races such as in the case of artificial intelligence (AI), trade wars, and more than anything else, bello-economics.¹²¹ The US has shown much of its hand with bello-economic tactics; nonetheless, it maintains the strength of the dollar and the heart of the world's financial system. The US, despite facing rising opposition, is, as Lee Kuan Yew is often paraphrased as suggesting, still the dominant power for now.¹²² China's strategy of dual circulation may alter this equation; it may exchange the world hegemon and center of the financial world, but such a transition is yet to take place.¹²³ China may have braced for US attacks with DCS, and the US may hold a monopoly on the chokepoint of the digital Cloud and a slight hedge in the AI race.

The metastasizing of a physical, kinetic war, however, becomes less likely as it becomes more costly. It would find an outlet such as a battle over Taiwan if it were to actualize.¹²⁴ However, so long as states have the power to contest one another without losing a single life, it serves as the more beneficial option for each. In summary, only time can tell if a war will break out, but the probability of physical war becomes less likely as the capability for economic war becomes more strategic. This article's claim is falsifiable rather than predictive of a fixed outcome: watch whether the floor of each rare-earth restriction cycle rises alongside independent indicators of Chinese financial and technological self-sufficiency.¹²⁵ That trajectory, not a hedge about whether war will or will not occur, is the test this analysis proposes.

Conclusion

The Cold War, the most recent Thucydides' Trap, resolved without direct conflict.¹²⁶ The most common explanation is mutually assured destruction: with both powers holding nuclear weapons, the cost of war was too high to bear. Conflict was instead displaced into proxy wars; for the US, the strategy was dubbed “containment”; for the Soviet Union, it was the defense of nations with Communist aspirations.¹²⁷ Proxy wars, an arms race, a space race, and the Cuban Missile Crisis all served as vents for the pressure of physical war, precisely because that war was unthinkable. The Cold War also saw export controls under the Coordinating Committee for Multilateral Export Controls and its China Committee (COCOM/CHINCOM), wheat embargo threats, and Reagan's 1983 National Security Decision Directive 75 (NSDD-75), bello-economic force deployed in place of war to inflict comparable damage.¹²⁸ It functioned not as an extension of war but as a workaround to it. Bello-economics plays the same role in the modern Thucydides' Trap: a release valve on physical war, which is unthinkable because it would shake the global order, the same order the US built and in which China has flourished.¹²⁹ War is too costly, not only in physical damage but in global legitimacy. This makes war self-defeating in a way earlier great-power rivalries were not. Modelski's model of shifting world orders assumed isolated powers; the US and China are instead both products of the same system, and each wishes to reshape it rather than escape it.¹³⁰ Their economies function less like separate bodies than like conjoined twins, sharing circulatory systems of capital, semiconductors, and consumer demand deep enough that severing them wounds both at once. This is weaponized interdependence: the same networks that give states coercive leverage over one another also bind them together, so that no side can sever the relationship without damaging itself.¹³¹ Direct, kinetic war would fracture the global order established after the mid-twentieth century, the same order that enabled China's rise.¹³² To attack the other is, in this sense, to attack the scaffolding of one's own ascent.

The US and China will likely not escape Thucydides' Trap, but will duel instead in a novel arena: bello-economics, a new form of warfare suited to a globalized world.¹³³ Mutually assured destruction is too costly an outcome, and damaging the global order amounts to the same thing by other means. Physical warfare does not disappear from this picture; however, it becomes the fallback once bello-economics stops working. Should China actualize DCS, its ability to use rare-earth and critical-mineral restrictions as leverage, as it has signaled toward Iran and Venezuela, would functionally cap out; economic coercion has a ceiling, past which China would need another channel to press an advantage.¹³⁴ Taiwan is the case where that channel becomes physical. Precisely because China gains little and risks much from attacking the US directly, Taiwan represents the likelier move: a shift in the balance of power that does not require overturning the world order itself.¹³⁵

If China restricts rare-earth and critical-mineral exports to the US defense and semiconductor industries, Washington's capacity to fund and field an effective military response is directly constrained¹³⁶, and the same self-sufficiency indicators traced in dual circulation strategy suggest this isn't a static threat.¹³⁷ As China's domestic capacity in these sectors closes the gap with its export leverage, the floor under how far it can restrict rare-earth flows to the US without matching self-sufficiency rises accordingly. The US and China act as conjoined twins in the global order; nonetheless, this pathway serves as a means to achieve a change in the balance of power, without disrupting the world order. That trajectory is the paper's central bet: bello-economic leverage over Taiwan-adjacent contingencies will tighten, not loosen, as China's self-sufficiency indicators climb.¹³⁸

Conjoined twins are not permanently safe from each other. A twin convinced that separation is coming regardless, and that waiting only weakens its position, has reason to reach for the scalpel on its own terms rather than be cut on someone else's. A twin which believes it will survive the operation, and is capable of building the world order, may seek to wage such an earth-shaking war. Such a mechanism Copeland's trade-expectation theory provides evidence for: interdependence restrains war only for as long as both sides expect it to continue.¹³⁹ Dual circulation is thus the axis such logic will pivot upon. Beijing agreed at the May 2026 Summit to work towards “constructive strategic stability”, invoking Thucydides' Trap directly¹⁴⁰; however, both powers prefer managed competition to direct and open conflict. As such, the role of bello-economics as a valve to manage such conflict is the strategy which, to each power, maximizes legitimacy with the least sacrifice of power, and vice versa. The Trap can be escaped, therefore, through a mechanism which benefits both nations, to maximize the profit and minimize the cost; bello-economics. Rhetoric and goodwill summits are beneficial, no doubt; however, the real cost of legitimacy in bello-economic escalation hinges on a balance between the US and China, as the latter's position in the world changes.¹⁴¹ That is, after all, the nature of Thucydides' Trap; furthermore, dual circulation provides such a mechanism to insulate the nation defensively, while retaining a footing on the battlefield of bello-economics offensively.¹⁴² As DCS matures, Beijing's bello-economic sword becomes a more and more viable option with less and less risk attached, as the shield absorbs the retaliatory cost of damaging the cycle.¹⁴³ Cost is present in war regardless; it is costly to send manpower and resources to fight in a war; it is costly, however, not to the same extent in terms of legitimacy, to fight an economic war.¹⁴⁴

What if, in short, one twin ensures its survival, while retaining the potential to cut off its counterpart? Such an option, if it requires no loss of international legitimacy through physical war, and no loss of power through DCS, would preserve China entirely. The prediction that follows is a trajectory rather than a date: watch whether the floor of each rare-earth restriction cycle sits higher than the one before it, and watch whether that trend moves together with independent indicators of Chinese financial and technological self-sufficiency.¹⁴⁵ If both trends rise together while the language of “constructive strategic stability” remains unchanged, that is not evidence the Trap has been escaped; it is evidence the terms on which it was being managed are quietly shifting in one direction. Bello-economics has so far kept the U.S.-China relationship out of physical war.¹⁴⁶ Whether it continues to is not a question of how long the pressure lasts, but of how long the asymmetry that makes pressure survivable for both sides lasts, and dual circulation is the clearest signal available that Beijing does not intend for that asymmetry to last much longer.¹⁴⁷ China may utilize a sword of bello-economics and shield of dual circulation to avoid the cost of cutting out the US, without shaking the world order, retaining legitimacy, while amassing power.

The relationship between the US and China is perhaps the most complex, if not, as Graham Allison writes, the “fiercest” Thucydides trap.¹⁴⁸ The world order has become deeply globalized, and the world's economies, which brought about the rise of China, could facilitate the very battleground between these two nations.¹⁴⁹ Such war could be entirely bello-economic, or it could metastasize into a physical war, based on the very same principles of power, legitimacy, and war probability.

The outcome, as is the nature of the future, is unclear; what is clear, however, is that nations prefer legitimacy without sacrificing power, and power without sacrificing legitimacy.¹⁵⁰ Bello-economics provides the tool for this strategy; Thucydides' Trap presents the playing field.

Notes & References

Notes