The Lawfulness of Unilateral Sanctions in the Wake of a US–China “Sanctions War”

Abstract

Despite what many saw as a détente in US–China relations as presidents Biden and Xi met at the G20 Summit in November 2022, both countries have continued to develop and deploy sanctions against one another. Among the most recent actions by the US is the continued use of export controls, particularly to limit China’s access to advanced computing chips. Meanwhile, China has continued to use sanctions to target US firms, recently in the form of a national security investigation into US chip maker, Micron, and “countermeasures” against major US arms manufacturers such as Raytheon and Lockheed Martin. This Article examines the range of economic sanctions that the US and China have and could deploy against one another, the lawfulness of these measures, and the likely effects of these sanctions for the future of international sanctions law. Although unilaterally imposed economic sanctions remain a deeply contested area of international law, an unintended consequence of the increasing use of sanctions by the world’s two largest economies will be to lend legitimacy and legality to their use. Although the economic costs of a US–China sanctions war would be staggering, such a war would only further entrench unilateral sanctions as a fundamental tool of national security and foreign relations. This Article describes how international law is likely to develop as a consequence of the proliferation of sanctions, arguing that, far from undermining their lawfulness, increased state practice will support a customary norm of unilaterally imposed sanctions.

Despite what many saw as a détente in US–China relations as presidents Biden and Xi met at the G20 Summit in November 2022, both countries have continued to develop and deploy sanctions against one another. Among the most recent actions by the US is the continued use of export controls, particularly to limit China’s access to advanced computing chips. Meanwhile, China has continued to use sanctions to target US firms,¹ recently in the form of a national security investigation into US chip maker, Micron, and “countermeasures” against major US arms manufacturers such as Raytheon and Lockheed Martin [32, 59]. This Article examines the range economic sanctions that the US and China have and could deploy against one another, the lawfulness of these measures, and the likely effects of these sanctions for the future of international sanctions law. Although unilaterally imposed economic sanctions remain a deeply contested area of international law, an unintended consequence of the increasing use of sanctions by the world’s two largest economies will be to lend legitimacy and legality to their use. Although the economic costs of a US-China sanctions war would be staggering, such a war would only further entrench unilateral sanctions as a fundamental tool of national security and foreign relations. This Article describes how international law is likely to develop as a consequence of the proliferation of sanctions, arguing that, far from undermining their lawfulness, increased state practice will support a customary norm of unilaterally imposed sanctions.

The first two parts of this Article examine the sanctions that the US and China already have deployed against one another. Although US sanctions against China are extensive, I show that they are relatively restrained, particularly in comparison to the US regimes in place against its clearer “adversaries.” I argue that the restraint in the deployment of sanctions by both the US and China shows their continued economic interdependence and desire to work constructively on a range of global issues.

The third part of the Article turns to the question of whether the US and Chinese unilateral sanctions regimes are lawful as a matter of international law. I closely examine whether unilateral sanctions are per se unlawful, whether they violate the principle of non-intervention, and whether secondary sanctions with extraterritorial effect lack a jurisdictional basis. I argue that, contrary to what many commentators suggest, a close examination of US sanctions regimes shows that we should conclude that they are lawful, both as a general matter of international law and with respect to narrower jurisdictional and treaty compliance issues.

The fourth part of the Article examines what a “sanctions war” between the US and China might look like, both in terms of the sanctions likely to be deployed and the effects on each economy. I argue that the mutual dependence of the two economies should lead the US and China to avoid their mutual economic destruction and find common ground to work constructively.

In conclusion, I argue that whether or not the US and China ultimately embark on a sanctions war, their increasing use of unilateral sanctions will have a lasting impact on the international law concerning coercive economic measures. Although neither state has explicitly defended the international lawfulness of their sanctions regimes, and China frequently casts its own deployment of sanctions as “countermeasures,” the increasing general practice of deploying unilateral sanctions further undermines the view that unilateral sanctions are unlawful. On the contrary, states appear to view the imposition of sanctions as one of their core competencies as sovereign states.

US Sanctions Against China and Their Triggers

The range of sanctions employed by the US against China has rapidly expanded since 2019. Although several of the triggers for these sanctions reflect long-standing US concerns, the greatest increase in recent sanctions activity by the US is due to relatively new concerns with China’s increasing technological and military might. For instance, the US has had long-standing trade restrictions in place around concerns with human rights and religious freedom that have been formally recognized at least since the US–China Relations Act of 2000.² The US has also had longer-standing concerns with unfair trade practices and currency manipulation, as well as concerns with the protection of intellectual property. However, it was only in the National Defense Authorization Act for 2019 (NDAA 2019) that the US formally recognized Chinese-origin telecommunications and surveillance technology as a possible security threat and prohibited its procurement and use in the US Federal Government.³ Since then, a broad range of restrictions on Chinese technology companies and those that the US associates with the “Chinese Military-Industrial Complex” have rapidly increased.

The rapid increase in sanctions has been accompanied by a marked change in how the US views China. In the last half-decade, China has transformed from a competitor with the US to an adversary. As recently as August 2017, when the US Congress passed the “Countering America’s Adversaries Through Sanctions Act,” China was mentioned only once and then in relation to sanctions against North Korea [39]. However, the NDAA 2019 explicitly groups China with Iran, Russia, and North Korea as cyber security threats and potential adversaries.⁴ Most recently, a joint announcement by the US Departments of Justice and Commerce announcing a “Disruptive Technology Strike Force” explicitly labels China as an “adversary” alongside Iran, Russia, and North Korea [64].

Despite these rather striking adversarial pronouncements and the increasing use of export and reexport restrictions, the US deployment of sanctions against China is still relatively restrained. For instance, there is no US sanctions program targeting China generally, nor the wide-ranging asset freezes and general transaction prohibitions that define the sanctions programs against Russia, Iran, and North Korea. The US stance toward China, while increasingly contentious, continues to reflect tremendous trade dependency and a desire to work constructively on a range of bilateral and global issues from trade to climate change. The gap, however, between the US deployment of sanctions against China and its clearer adversaries gives us an indication of how sanctions could develop should US-China relations continue to deteriorate. I will thus begin here with a review of the complex web of sanctions in place against China today, a complexity that is driven precisely by a desire on the part of the US to continue economic relations with the vast majority of the Chinese economy. I will then review the sanctions that China has adopted against the US before discussing the more far-reaching sanctions that could be deployed in the future.

US sanctions against China can be grouped into 3 broad categories with some overlap: (1) US concerns with human rights and democracy in Hong Kong and Xinjiang, (2) US concerns with China’s military and technology development, and (3) US concerns with surveillance and cyber security at home. The primary set of China-focused sanctions under the democracy and human rights category are those authorities created in response to the Hong Kong National Security Law that came into force in Hong Kong on June 30, 2020. The US Congress passed the Hong Kong Human Rights and Democracy Act of 2019 and the Hong Kong Autonomy Act in 2020 (HKAA), while President Trump issued Executive Order (EO) 13936 on the same day as signing the HKAA. EO 13936 ended differential treatment for Hong Kong in relation to China and, along with the HKAA, provided the authority to impose traditional asset freezes and transaction bans on any person or entity determined to be “materially contributing” to the erosion of Hong Kong’s autonomy as guaranteed in the 1985 Sino–British Joint Declaration and the Basic Law of the Hong Kong Special Administrative Region. While the HKAA and EO 13936 largely overlap, the HKAA specifically adds secondary sanctions targeting foreign financial institutions that knowingly conduct significant transactions with a person designated under EO 13936.⁵

The other significant Chinese human rights policy concern for the US is the treatment of the Uyghur and members of other predominantly Muslim ethnic minority groups in Xinjiang. Although the US Congress passed the Uyghur Human Rights Policy Act of 2020, there has been no accompanying Executive Order or stand-alone sanctions program focused specifically on human rights in Xinjiang. Rather, traditional sanctions have been imposed pursuant to Executive Order 13,818 and the Global Magnitsky Human Rights Accountability Act of 2016.⁶ Additionally, President Biden has expanded the sanctions targeting China’s “military-industrial complex” to also cover the “use of Chinese surveillance technology to facilitate repression or serious human rights abuse” [49].⁷ As a result, an increasing number of investment and export restrictions with a human rights motivation have been imposed on Chinese technology firms, thus creating an overlap between US human rights and technology targets.⁸

In addition to human rights concerns, the US has increasingly targeted Chinese technology and industry in response to concerns over the development of the Chinese military and security apparatus. The most visible manifestation of the US response has been the Chinese Military-Industrial Complex sanctions developed by Executive Orders 13,959 and 14,032, which prohibit US persons from investing in identified Chinese companies. The Chinese Military-Industrial Complex sanctions are just the tip of the iceberg of US restrictions on Chinese technology and military corporations, however. The US deploys a vast web of export, reexport, financing, and investment restrictions on a range of Chinese corporations and sectors. The most visible of these in recent years have been restrictions applied in relation to Huawei and Hikvision, culminating in October 2022 with far-reaching export restrictions on US-origin goods, technology, and services related to advanced computing and semiconductor manufacturing.⁹

In addition to the investment restrictions put in place by the Chinese Military-Industrial Complex sanctions, there are four other primary groups of US restrictions currently placed on Chinese technology, US services in relation to Chinese technology and investment, and US technology going to China or being used in goods ultimately destined for China or a Chinese entity. The first group of these has come under the US Federal Communications Commission’s “Covered List” of telecommunication equipment found to pose a risk to the national security of the United States [8, 53]. The Covered List has produced some of the highest profile restrictions on Chinese technology over the last four years with the highly publicized orders banning certain Chinese telecommunications equipment and software from the US government and private computer and telecommunications networks. In turn, US telecommunication providers must remove all equipment and services provided by companies on the Covered List from their networks [9]. They are also banned from using FCC funds to acquire equipment or services from listed companies, including their subsidiaries [53].

A second group of restrictions has come through the so-called Sect. 889 rule passed by the US Congress as part of the NDAA 2019. The rule bars government procurement of “any equipment, system, or service that uses covered telecommunications equipment or services as a substantial or essential component of any system, or as critical technology as part of any system,” on or after August 13, 2019.¹⁰ The Sect. 889 rule also prohibits executive agencies from entering into, or extending or renewing, a contract with an entity that uses any equipment, system, or service that uses covered telecommunications equipment or services as a substantial or essential component of any system, or as critical technology as part of any system unless an exception applies or a waiver is granted.¹¹ There are now more than 60 Chinese technology firms covered by these restrictions including Huawei, Hikvision, Dahua, and ZTE [57].

In addition to restrictions on the use of technology from certain Chinese companies in the United States, there is also a third cluster of restrictions on the export of US technology to a host of Chinese persons and entities. The Export Administration Regulations (EAR) are maintained by the Department of Commerce Bureau of Industry and Security (BIS). The so-called “Entity List” contains “a list of names of certain foreign persons—including businesses, research institutions, government and private organizations, individuals, and other types of legal persons—that are subject to specific license requirements for the export, reexport and/or transfer (in-country) of specified items” [25]. The Entity List contains individualized licensing requirements for each listed entity, thus giving the BIS the ability to tailor licensing requirements to each entity based on individualized threat assessments, including imposing a “presumption of denial” of licensing applications for certain entities.¹² The most significant recent action by the BIS has been the extensive new export restrictions on advanced computing semiconductor chips, integrated circuits, and transactions for supercomputer end-uses, as well as controls on semiconductor manufacturing items and on transactions for certain integrated circuit end use [2]. These restrictions have been put in place specifically to hamper China’s military modernization project and its pursuit of advanced AI [24, 26]. Part of the new restrictions on advanced computer chips and related technology utilizes one of the farthest-reaching tools of US sanctions law, the foreign direct product rule, whereby the BIS imposes restrictions on foreign-made products when their production involves controlled US-origin technology, software, or equipment [50]. The foreign direct product rule controls the export, reexport, and in-country transfer of foreign-produced products by and between foreign persons. We will return to the extra-territorial reach of these US regulations and their status under international law in Part III below. As a preliminary matter, however, we can note that there is nothing intrinsically unlawful, or even uncommon, in imposing reexport and end-user restrictions on classes of goods, as is the rule with military items. The key legal question for the far-reaching US restrictions will be whether the US has a valid jurisdictional basis for them under international law.

A fourth significant area of US restrictions comes via the Committee on Foreign Investment in the US, or CFIUS, which has the power to investigate, block, suspend, or unwind foreign investments or acquisitions in the US that pose national security risks [7]. The role of CFIUS gained international attention when President Trump ordered ByteDance, the Chinese parent corporation of TikTok, to divest from TikTok’s US operations [48]. While CFIUS is still reviewing whether the divestment order should stand, news that ByteDance employees had accessed and tracked the personal data of US journalists and other US persons through their TikTok accounts has renewed fears that TikTok could be used as a tool of China’s intelligence services.¹³ At the same time, President Biden’s Executive Order 14,083 added new criteria for CFIUS reviews for the first time since the establishment of CFIUS in 1975 [106]. Several of the criteria added would apply specifically to Chinese technology corporations, including TikTok. Indeed, the EO requires CFIUS to consider “A given transaction’s effect on US technological leadership in areas affecting US national security, including but not limited to microelectronics, artificial intelligence, biotechnology and biomanufacturing, quantum computing, advanced clean energy, and climate adaptation technologies;” “Cybersecurity risks that threaten to impair national security,” and “Risks to US persons’ sensitive data.” These criteria advert to the US concern that Chinese companies may be legally required to turn over private information for Chinese national security or intelligence reasons.¹⁴ Investment restrictions are hardly a new feature of the US national security architecture or unique to the United States. What is remarkable, however, is the extent to which these tools are increasingly marshalled specifically in relation to perceived national security threats emanating from China.

In addition to all of the above, the US has a range of further tools that it can use both to thwart Chinese influence at home and frustrate China’s own technology and military development. These additional tools include visa bans on employees of certain Chinese corporations such as Huawei; “Sect. 337” investigations into imported goods that infringe patent rights [10, 104]; de-listing from US stock exchanges; Federal Communication Commission license denial or restriction; and Information and Communications Technology and Services (ICTS) Supply Chain Security Review by the Department of Commerce. Each of these measures has been applied, often in combination with several other “sanctions” described above, to several Chinese technology companies.

China’s Sanctions Response

While not yet as extensive as US financial sanctions, export controls, and investment restrictions, China is quickly developing its own legal authorities in these areas, often as a direct response to US actions in these domains. The central mechanisms that China has developed are its Unreliable Entities List, Anti-foreign Sanctions Law, Export Control Law, and Foreign Investment Law.¹⁵

The Unreliable Entities List and the Anti-Foreign Sanctions Law are both sanctions regimes with similarities to the US sanctions and export control regimes. Most notably, they have been used against US companies Raytheon, Lockheed Martin, and Boeing for supplying arms and military equipment to Taiwan [32, 69, 70, 76, 77]. China’s recent actions against Raytheon and Lockheed Martin have frozen all of their assets in China, baned them from imports and exports related to China, and levied a fine equal to twice the amount of the contracts for their supply of arms to Taiwan since 2020, an amount in the hundreds of millions of US dollars [32, 79, 80]. China has also imposed sanctions on US officials in relation to Taiwan, including the sanctioning of former US Speaker of the House of Representatives, Nancy Pelosi, “and her immediate family members” in relation to her high-profile visit to Taiwan in August 2022 [55, 58]. In addition to sanctions in relation to Taiwan, China has also imposed sanctions on US politicians and officials in direct response to US sanctions, for example, US sanctions imposed on Chinese officials over human rights abuses in Xinjiang, which led to Chinese sanctions against US Senators Marco Rubio and Ted Cruz, Congressman Chris Smith, and Sam Brownback, the ambassador-at-large for international religious freedom, as well as sanctions on the US Congressional-Executive Commission on China [67, 75].

China’s Export Control Law is also broadly similar to the US regime, imposing export restrictions on certain controlled items, as well as extraterritorial reexport and end-user requirements [15]. China’s list of controlled items ranges from military and nuclear items to more general categories of items, services, and technologies related to national security and national interests [15]. The Export Control Law requires exporters to certify the end-use and end-users of controlled items and imposes monetary penalties for violations [15]. Thus far it does not appear that China has used the Export Control Law to specifically target the US. However, several US firms, including Micron, have become increasingly concerned that China might strategically limit its export of rare earth elements and other strategic minerals necessary for the development of US military and computing technology [17, 59].

One area in which China has recently loosened restrictions is in its foreign investment regulations. In 2020, a new Foreign Investment Law came into effect in China which combined and simplified three previous foreign investment regimes [18, 54]. Under the new law, the number of prohibited areas of foreign investment has been reduced and certain conditions on foreign investment, such as requirements to form joint ventures with Chinese companies, which effectively transfer foreign technology and intellectual property to those companies, have also been reduced [87]. Nevertheless, China continues to impose far more restrictions on foreign investment than the EU or US [51]. Moreover, since January 2021, a separate national security review of foreign investment has taken on an increasingly prominent role [87]. A national security review is triggered not just by investments in military industries but also ownership or control of corporations in a host of “critical” industries including agriculture, energy, equipment manufacturing, transportation services, cultural products, services relating to information technology or the internet, financial services, and other key technologies [87]. “Control” in this context extends not just to 50% share ownership but also to minority voting rights that nevertheless are sufficient “to materially influence resolutions at meetings of shareholders or the board of directors,” as well as the ability to “exercise material influence over key matters such as business decisions, personnel, finances, and technology through other means” [87]. The national security review mechanism is given broad discretion to determine which areas of the Chinese economy are “critical” and conduct its review accordingly. Analysts have noted that “[i]n practice, the national security regime is opaque in terms of timing, procedures and outcome” [87]. Thus despite moves to open the economy through the 2020 Foreign Investment Law, China’s national security review of foreign investment has the potential to impose extensive restrictions in response to policy changes or national security concerns.

Despite the growing number of sanctions authorities and actions against the US by China and the numerous and complex array of sanctions tools being deployed against China by the US, neither is an indication of a comprehensive or severe sanctions stance toward the other. On the contrary, the numerous sanction mechanisms and their complexity indicate their targeted nature. As I suggested earlier, the US sanctions against China reflect its desire to leave the vast majority of the Chinese economy untouched by US sanctions. The absence of a blunt sanctions instrument deployed against China indicates the US desire both to trade and to find common ground on global issues. The same is true of China given the targeted nature of its use of sanctions thus far. Even if the two economies remain largely interdependent and their use of sanctions finely targeted as a result, the rapid increase in unilateral sanctions deployed by both sides raises the question of their lawfulness under international law. Indeed, China frequently refers to US sanctions as “illegal unilateral sanctions,” and to its own sanctions activities as “countermeasures.”¹⁶ Whether or not China’s responses to US actions are properly construed as countermeasures depends entirely on whether unilateral sanctions of the kind the US imposes are unlawful in the first place.¹⁷ It is to those legal questions that I now turn.

Unilateral Sanctions Under International Law

Given the complex web of US sanctions and the increasing development of Chinese sanctions authorities, it is natural to ask whether these sanctions regimes are lawful as a matter of international law. US sanctions, in particular, have come under attack both for their unilateral nature and their extraterritorial reach, charges that have been frequently levied by China itself [32,33,34,35,36, 42]. In this part, I will address three central charges against US sanctions, the first two of which could also be applied to Chinese sanctions¹⁸: (1) that unilateral sanctions, i.e., sanctions deployed outside the UN Security Council, are per se unlawful; (2) that economic sanctions violate general principles of international law, including violating other states’ sovereignty thus amounting to an abuse of rights; and (3) that while “primary” sanctions governing the territory and citizens of a state may be lawful, “secondary” sanctions that target the conduct of foreign citizens extraterritorially are unlawful. In addressing the lawfulness of secondary sanctions, I will focus in particular on those that appear to strain the international law of jurisdiction by looking closely at the secondary sanctions targeting foreign banks transacting with sanctioned entities in Hong Kong and at the export and reexport controls flowing from the foreign direct product rule.

Are Unilateral Sanctions per se Unlawful?

Views on the status of unilateral sanctions under international law range from eager embrace to legal denunciation.¹⁹ Among the critics, there are those who argue that “unilateral sanctions should have no place in the realm of the rules-based intentional order” [89], p. 3]. Some commentators go even further and advance the claim that “States, individually or in coalition among themselves, are not entitled to adopt sanctions independently from a Resolution of the [UN Security Council]. They may only adopt restrictive measures in the form of countermeasures to react against an international wrong committed by the target State” [82], p. 31].²⁰ On the face of it, such strong claims may appear to have some sound basis. For instance, the 1970 Declaration of Friendly Relations Among States by the UN General Assembly holds, “[n]o State may use or encourage the use of economic, political or any other type of measures to coerce another State in order to obtain from it the subordination of the exercise of its sovereign rights and to secure from it advantages of any kind” [94].²¹ When the above declaration is coupled with the international law principle of non-intervention in the political and economic independence of other states,²² it can appear that the measures of economic coercion we have been discussing must be unlawful.

The unlawfulness of unilateral economic sanctions quickly fades when we scratch beneath the surface. There simply is no codified or developed area of law regulating unilateral sanctions [89], p. 3]. As Tom Ruys recalls, in 1993 “a UN panel of experts found insufficient consensus in international law to allow any instrument to be formed on [economic sanctions]” [83]. At the time, the Secretary General of the UN concluded, “[t]here is no clear consensus in international law as to when coercive economic measures are improper...” [97]. The situation has not changed over the last 30 years and, if anything, the proliferation of more unilateral sanctions regimes by more states would tend to speak for their lawfulness. Moreover, the UN General Assembly declarations that would appear to “ban” economic sanctions simply do not carry the force of law, as the General Assembly is only empowered to “make recommendations” [82], p. 2; 29, arts. 10–12].²³ Only Security Council Resolutions are legally binding on states.²⁴ Notwithstanding the Security Council’s authority to order sanctions, the claim that the Security Council has exclusive competence to impose economic sanctions is equally without basis [82], pp. 1, 31]. There is nothing in the UN Charter specifying the exclusive purview of the Security Council to impose economic sanctions. Nor is there a prohibition against states doing so unilaterally. More careful commentators thus conclude, “in the absence of a binding international treaty regulating unilateral sanctions and without identifying or establishing the existence or formulation of a rule of customary international law regulating unilateral sanctions it is difficult to regard such sanctions unlawful” [89], p. 32].²⁵

Even if unilateral economic sanctions were in themselves unlawful, they may nevertheless be lawful as countermeasures taken in response to the unlawful actions of other states. Countermeasures are otherwise unlawful but justified acts because they are taken in order to induce another state to return to a lawful course of conduct [93], pp. 616–633, p. 622, 623f., 626]. Thus, for example, western sanctions against Russia, even if unlawful in themselves, would likely be lawful as countermeasures in response to Russia’s unlawful invasion of another sovereign state.²⁶

Although some unilateral sanctions could come under the rubric of countermeasures,²⁷ many more are probably better classed as retorsions, that is, lawful, though unfriendly, acts designed to put economic pressure on a target state.²⁸ Although such economic pressure may be lawful as a matter of general international law, such actions might trip over the hurdle of friendly relations or most-favored-nation status guaranteed in bilateral treaties or multilateral trade treaties such as the General Agreement on Tariffs and Trade (GATT) or WTO regimes. That is, if sanctions-imposing states have specifically contracted not to impose unfriendly economic measures on each other, then they may fall afoul of their Treaty commitments. However, nearly all of these treaties, including the GATT Art. XXI, will contain some security exception for a state to “tak[e] any action which it considers necessary for the protection of its essential security interests,” particularly “in time of war or other emergency in international relations” [56], art. XXI].²⁹ Thus, generally speaking, unilateral sanctions are neither per se unlawful under international law nor a right that states have contracted away.

Before turning to more specific provisions of international law, it is worth noting that the language of treaty “security exceptions” and how a state explicitly justifies its own economic measures is of great legal import [27], p. 36, paras. 106–08]. As confirmed in the International Court of Justice’s (ICJ) recent judgment in Certain Iranian Assets, a treaty that gives an exception for what is “necessary” for a state’s security interests will offer that state considerably less discretion than a treaty that grants an exception for what a state “considers necessary” for its security interest [27], p. 36, paras. 106–107].³⁰ Even when that more permissive language is present, as it is in GATT Art. XXI, a recent ruling of the WTO for China and against the US³¹ demonstrates that if a state does not justify its economic measures in explicit and plausible national security terms, it may forfeit the protection offered by a treaty’s “security exception” [27], p. 36, para. 108].³² In light of Certain Iranian Assets and prior ICJ jurisprudence, states are likely to ensure both that any treaty they enter into contains discretionary security exception language and also that their own economic measures are explicitly and logically grounded in their own security interests. Doing so will give states broad cover under international law to impose far-reaching economic sanctions.

Do Unilateral Sanctions Breach the Principle of Non-Intervention in other States’ Sovereignty?

Even if there is no basis to dismiss sanctions as per se unlawful, some commentators persist in the view that the principle of non-intervention in the sovereign affairs of other states must preclude the imposition of unilateral economic sanctions. The central problem with grounding the unlawfulness of unilateral sanctions on the principle of non-intervention is the vagueness of the principle itself.³³ Even those who advance the claims that non-intervention prohibits unilateral sanctions admit that “[i]t is difficult to individuate the category of actions that do not constitute threat or use of force but are nonetheless a violation of the principle of non-intervention” [82], p. 4]. Indeed, in each of the three judgments in which the ICJ has dealt with the principle of non-intervention, it has always been intermingled with the threat or use of military force, which constitutes a clear violation of the principle [38, 41, 72]. The ICJ’s pronouncement on the principle in Nicaragua bears citing at length.

[I]n view of the generally accepted formulations, the principle [of non-intervention] forbids all States or groups of States to intervene directly or indirectly in internal or external affairs of other States. A prohibited intervention must accordingly be one bearing on matters in which each State is permitted, by the principle of State sovereignty, to decide freely. One of these is the choice of a political, economic, social and cultural system, and the formulation of foreign policy. Intervention is wrongful when it uses methods of coercion in regard to such choices, which must remain free ones. The element of coercion, which defines, and indeed forms the very essence of, prohibited intervention, is particularly obvious in the case of an intervention which uses force, either in the direct form of military action, or in the indirect form of support for subversive or terrorist armed activities within another State [72], para. 205].

While the Court in Nicaragua makes it clear that military uses of force constitute a violation of the principle, it also implies that there may be non-military ways in which the principle could be violated. However, the ICJ offers no clarity on precisely when or how non-military means might interfere in the sovereignty of other states in violation of the principle.³⁴

To add some clarity, we should distinguish between unlawful coercion under actual or threatened military violence and the kind of economic coercion that may come from economic sanctions. Thus where the ICJ in Nicaragua refers to matters in which states are entitled “to decide freely,” we should understand unlawful intervention to consist precisely in the abridgement of the power to choose, rather than in the reduction of choices or costs on them. For whatever free choice amounts to, it cannot mean costless and unlimited choice. Sovereignty and its exercise occur within a closed set of choices, each of which involves costs and tradeoffs. Unilateral sanctions do impose costs on the choices of states and private actors, but they do not impair their power to choose in the way that a threat or use of military force would. Thus as a general matter of international law, we should conclude that unilateral sanctions do not unlawfully infringe on states’ sovereignty.³⁵

Do ‘Secondary Sanctions’ with Extra-Territorial Effect Violate States’ Sovereignty?

Although unilateral sanctions may not be unlawful as a matter of general international law, it may still be the case that certain sanctions or certain classes of sanctions are unlawful. Most close studies of sanctions distinguish between “primary” and “secondary” sanctions, focusing criticism principally on the latter. Primary sanctions are sanctions that a state adopts by placing restrictions on economic activity between it and a target state. Such conditions are, as a matter of law, generally directed at the citizens of the state adopting the sanctions by making rules with respect to the economic relations they may or may not enter with the target state. By contrast, secondary sanctions seek to deter third-state nationals from certain economic relations with the target state, usually by conditioning access to economic privileges with the targeting state on third-state nationals’ abstention from specified economic relations with the target state.³⁶ For an example of a primary sanction under the Hong Kong Autonomy Act (HKAA), US banks are prohibited from processing transactions for individuals or entities determined to be “materially contributing” to the erosion of Hong Kong’s autonomy as guaranteed in the 1985 Sino–British Joint Declaration and the Basic Law of the Hong Kong Special Administrative Region [61], sec. 5(a), sec. 6(b)(1)(A-C)]. By contrast, a secondary sanction may restrict a foreign bank’s access to correspondent banking in the US if it “conducts significant transactions with foreign persons that contravene the Joint Declaration or the Basic Law” of Hong Kong [61], sec. 7(b)(5)]. Although secondary sanctions are also generally legally directed at US persons—in this case, US banks—they aim to influence foreign actors so that they do not to participate in activity that is closed off to US persons—here banking with designated individuals. Secondary sanctions are thus generally designed as a direct reinforcement of primary sanctions, preventing what has become known as “backfilling,” that is, the replacement by foreign actors of economic activity that is closed off to US citizens.

Primary sanctions are generally considered to be less problematic than secondary sanctions from an international law perspective because primary sanctions, although directed against a foreign state or foreign persons, impose legal restrictions primarily on the citizens of the targeting state. Thus as we saw with the US sanctions targeting the “Chinese Military-Industrial Complex,” the primary restriction arising from those sanctions is on US persons who are prevented from investing in the designated Chinese companies. Other sanctions may prevent US persons from exporting or importing goods from certain jurisdictions or legal persons, or prevent US banks from transacting with certain jurisdictions or legal persons. A very significant part of US sanctions consists primarily in restricting the economic relations that US actors can enter into.

There are, of course, also aspects of primary sanctions that more directly affect foreign actors by denying them access to the US market or financial system. Thus, for instance, the companies listed on the FCC Covered List discussed above are essentially cut off from a very substantial part of the US market. Although the Covered List places legal obligations and restrictions on US persons, it is foreign companies that are singled out for economic ostracism. The question thus naturally arises of whether a state may, as a matter of international law, economically exclude foreign persons, or entire jurisdictions in some cases,³⁷ from its market or financial system. Ruys and Ryngaert argue that “international law does not entitle foreign persons to financial, economic, or physical access to the US” [84], p. 12]. They thus regard sanctions that deny such forms of access as denials of privileges that a state is free to extend or deny to foreign actors. Since US primary sanctions consist entirely of legal restrictions on US persons and denials of privileges to foreign persons, they do not raise general issues of international law.

Although unilateral primary sanctions are perfectly consistent with a state’s sovereign power to regulate its own citizens and extend privileges to foreign actors as it sees fit, unilateral secondary sanctions with extraterritorial effect are often seen as exceeding the sovereign authority of the targeting state and thus in violation of the principle of non-intervention and an abuse of rights. Julia Schmidt, for example, has argued that some US extra-territorial sanctions “might reach the threshold of an intervention into the domaine réservé of sovereign actors” and thus “amount to an abuse of rights” [85], p. 57]. As we have already seen in our examination of the Nicaragua judgment, however, the problem with these kinds of charges is that the principles of non-intervention and abuse of rights are open to many different subjective assessments [84], p. 10].³⁸ As Ruys and Ryngaert argue,

precisely when an intervention unlawfully impinges on a foreign state’s sovereignty is notoriously difficult to define. . . . Insofar as secondary sanctions may potentially constitute an abuse of rights, in particular in cases of arbitrary or disproportionate application of sanctions legislation, it remains in the eye of the beholder what is arbitrary or disproportionate in a given case—an issue which has long dogged the related principle of jurisdictional reasonableness [84], p. 10].³⁹

There simply is no clear rule of international law prohibiting states from deploying secondary sanctions, let alone a rule as clear and universally accepted as the rule prohibiting armed attacks.⁴⁰ Thus, in the absence of such a rule, even secondary sanctions appear to be lawful as a general matter of international law.

Does the US Lack a Jurisdictional Basis for Imposing Secondary Sanctions?

Where, however, certain US secondary sanctions may raise clearer legal issues are precisely around the international law of jurisdiction. Two key examples arise in the context of US sanctions on China that serve as good test cases for whether at least some US sanctions exceed its sovereign powers by purporting to bring foreign actors within its prescriptive and enforcement jurisdiction. These are the secondary sanctions placed on foreign banks for certain transactions in the context of its Hong Kong-related sanctions, and the restrictions on foreign-produced products and foreign actors in the context of its sanctions on semiconductors, particularly in relation to the foreign direct product rule. I will now examine the jurisdictional problems raised by secondary sanctions generally before closely examining US secondary sanctions on foreign banks in relation to Hong Kong and its secondary sanctions on foreign actors in relation to advanced computing technology.

As a general matter, the crucial jurisdictional question that arises is whether the United States legitimately exercises its prescriptive and enforcement jurisdiction when it passes laws regulating what foreign persons may or may not do, and then imposes civil and criminal penalties on foreign persons when they contravene its dictates.⁴¹ To answer that question, a prior question must first be addressed: must a state rely on a positive rule or principle of international law in order to exercise jurisdiction, or is it free to exercise jurisdiction as long as it does not contravene an established rule of international law? While some commentators continue to read the ICJ’s Lotus case for the principle that only a positive rule of international can limit a state’s otherwise unfettered exercise of jurisdiction,⁴² there is general agreement that a state’s jurisdictional claims will be stronger if it can rest them on at least one of the four traditional principles of jurisdiction under international law: territory, nationality, passive personality, or the protective or security principle.⁴³ The territory principle is perhaps the strongest principle of jurisdiction insofar as it conforms to the traditional notion that a state legitimately exercises jurisdiction throughout its territory, including over foreign persons and entities on its territory.⁴⁴ The nationality principle extends the territory principle by recognizing States’ power to exercise jurisdiction over citizens and entities incorporated in its jurisdiction, even when they travel or have operations located abroad.⁴⁵ Passive personality, by contrast, involves the assertion of jurisdiction over aliens “for acts abroad harmful to nationals of the forum” state [40], p. 444]. Passive personality, particularly outside of criminal jurisdiction, is substantially more controversial. However, a related ground of jurisdiction, which has become known as the “effects doctrine,” plays a large role in US sanctions law, and attaches when an extraterritorial action causes harmful effects in the US.⁴⁶ Finally, the protective or security principle may be the basis for “jurisdiction over aliens for acts done abroad which affect the... security or other key interests of the state” [40], p. 446]. The security principle allows states considerable discretion to invoke jurisdiction and, in combination with other bases of jurisdiction, plays a large role in US sanctions which are frequently formed in response to an Executive Order declaring a “threat... to the national security, foreign policy, and economy of the United States” by the US president.⁴⁷ Given these established bases, I will now turn to a closer look at the secondary sanctions explicitly imposed on “foreign financial institutions” under the Hong Kong Autonomy Act to determine whether they stand up to jurisdictional scrutiny.

Does the US Lack Jurisdiction for Imposing Secondary Financial Sanctions?

Section 5(a) of the Hong Kong Autonomy Act requires the US Secretaries of State and the Treasury to identify foreign persons who have materially contributed to the erosion of Hong Kong’s autonomy [61], sec. 5(a)]. Section 5(b) of the Act then requires the Secretaries to identify foreign financial institutions that knowingly conduct a significant transaction with a foreign person identified under Sect. 5(a). The obligations and restrictions imposed in relation to individuals identified under Sect. 5(a) are entirely placed on US persons and entities. As clarified by OFAC FAQ 848, the sanctions’ implications for persons identified under Sect. 5(a) are that US persons are barred from transacting with or releasing the property of identified persons [99].⁴⁸ Despite the fact that Sect. 5(b) is clearly an example of secondary sanctions aimed at influencing the behavior of foreign banks potentially anywhere in the world [99], its legal requirements are also aimed entirely at US persons. Thus the menu of ten possible sanctions that may be imposed on foreign financial institutions are all aimed at US private and government persons and entities [61], sec. 7(b)(1–10)]. For instance, US private banks may be barred from “making loans or providing credits to the foreign financial institution,” conducting “transactions in foreign exchange that are subject to the jurisdiction of the United States and involve the foreign financial institution,” or conducting “transfers of credit or payments between financial institutions or by, through, or to any financial institution, to the extent that such transfers or payments are subject to the jurisdiction of the United States and involve the foreign financial institution” [61], sec. 7(b)(1, 4, 5)]. The Act may also prevent US government officials from designating the foreign financial institution as a primary dealer in United States Government debt instruments, it may require “the Secretary of Commerce [to] restrict or prohibit exports, reexports, and transfers (in-country) of commodities, software, and technology subject to the jurisdiction of the United States directly or indirectly to the foreign financial institution,” and it may require the Secretaries of State and Homeland Security to deny visas and entry to the corporate officers of the foreign financial institutions [61], sec. 7(b)(2, 7, 9)]. The menu of sanctions puts foreign banks on notice of the potentially high cost of conducting business with individuals designated under the Act, indicating that doing so could result in being cut off from the US financial system altogether.

At the time of this writing, there have been no foreign financial institutions identified by the US Department of the Treasury as conducting significant transactions with foreign persons designated under the Hong Kong Autonomy Act. The US Treasury’s failure to designate any foreign financial institutions under the Act should not, however, be taken as a sign of lax implementation of the Act, but rather as a sign of the high deterrence value that US secondary sanctions have on banks, at least on those banks that are concerned to process transactions in US dollars through the United States. In any case, all of the sanctions that could be imposed on foreign banks are denials of privileges that the US is not obliged to extend in the first place. As a result, they do not raise jurisdictional issues. Where, however, jurisdictional issues arise are in the penalties that may be imposed on a foreign person or entity when it “violates, attempts to violate, conspires to violate, or causes a violation” of the sanction imposed under the Act [61], sec. 9(b)].

A foreign bank could become susceptible to a penalty under the act, for instance, by transmitting a payment in dollars that passes through a US correspondent bank en route to the foreign bank account of a person designated under the HKAA. In such a case, a transaction between foreign persons that starts and ends at foreign banks could nevertheless be caught by US sanctions when it transits a US bank. Some commentators argue that applying jurisdiction to the mere use or transiting of the US financial system cannot be justified under any of the four traditional pillars of jurisdiction [84], p. 22]. The US takes a different view, however, holding that where such transactions transit the US and/or involve a US bank, they come within the territorial jurisdiction of the US and cause a US person, e.g. the US correspondent bank, to violate US sanctions law by exporting a service to a designated individual.⁴⁹ Although some commentators claim that the connection to US territory is overly tenuous, a closer examination of these transactions reveals the essential role of US banks and the US financial system in them. Indeed, the power and reach of US sanctions rests on the pervasive role of the dollar in international commodities trading and international trade more generally. Most significant international commercial banks are dependent on access to the US financial system for their livelihood. As with the sanctions that amount to denials of privilege, the US puts foreign individuals on notice of the conditions of access to its financial system and imposes penalties for violation of those access conditions. Although those penalties can sometimes run to the billions of dollars, foreign banks generally agree to settle with the United States—thus voluntarily submitting to US jurisdiction—precisely in order to maintain access to the US financial system on which they depend.⁵⁰ Thus in addition to basing jurisdiction on the security of its financial system and the fundamental role that banks on US territory play in international transactions, the US can also base enforcement jurisdiction for secondary sanctions on the consent of the parties involved.

Does the Foreign Direct Product Rule Lack a Jurisdictional Basis?

Although secondary sanctions on foreign banks ultimately may not raise jurisdictional issues, the far-reaching export and reexport rules flowing from the foreign direct product rule stretch the core bases of jurisdiction far beyond their traditional application. As discussed above, in October 2022, the US Bureau of Industry and Standards introduced extensive export, reexport, and in-country transfer restrictions on foreign-produced advanced computing items destined for China [24]. The restrictions reach a range of items that the US believes are essential to China’s military advancement, including high-performance integrated circuits, semiconductors, computer chips, and all items with a supercomputer-related end-use.⁵¹ The question naturally arises of how the US can purport to impose restrictions on foreign-produced products, produced by foreign entities, and destined for a foreign state and foreign end-users. The jurisdictional hook, for the US, is contained in the foreign direct product rule itself. The rule captures any foreign product that is the direct product of US technology or software that is itself subject to US export and reexport licensing requirements, or that is produced in a foreign plant that either contains a major component that is the direct product or is itself the direct product, of US technology or software that is subject to US export and reexport licensing requirements.⁵² In other words, if the production of a product uses export-restricted US technology or software, then the product of that US technology is also subject to US export restrictions. The implications for foreign corporations, including advanced computing leaders such as ASML, a Dutch company that produces some of the most advanced semiconductor tools, and TSMC, the Taiwan company leading in advanced semiconductor manufacturing, are vast. Both companies would have to cease exporting to China any of their advanced computing equipment and components that rely on US technology in their production [21, 86]. A refusal to comply with the restrictions risks being subject to fines or, ultimately, facing US sanctions that would cut the companies off from US technology altogether.⁵³ Although the rules and the risk are clear enough, the question remains of whether the US is entitled to make such laws in the first place and, if so, on what jurisdictional basis they might be founded.

Various commentators and the EU itself have complained about the unlawfulness of US reexport controls under international law.⁵⁴ Ruys and Ryngaert argue that US reexport controls lack a strong jurisdictional basis because, once US-origin goods leave the US, they no longer have a territorial or nationality connection to the US [84], p. 20]. Although it is clear that the territorial basis of jurisdiction fails once goods leave the United States, I have argued elsewhere that the nationality principle may still apply and, over and above nationality, the security basis of jurisdiction will almost certainly continue to apply.⁵⁵ Here, however, I want to explore a far more straightforward basis of jurisdiction, namely consent through contract.

As has been widely publicized in recent conflicts, reexport and end-user controls are standard in the context of military exports. The negotiations around the reexport of German Leopard 2 tanks to Ukraine are a case in point [81]. The US also imposes extensive reexport and end-user controls on its military exports [5],⁵⁶ as does every other major arms-exporting country including China [23, 37]. These restrictions and controls generally come not as an extraterritorial assertion of jurisdiction by the exporting state, but rather as a contractual obligation that the original purchaser, importer, and/or end-user voluntarily entered into. For instance, for US military items, the exporter must include a statement that,

These items are controlled by the US government and authorized for export only to the country of ultimate destination for use by the ultimate consignee or end-user(s) herein identified. They may not be resold, transferred, or otherwise disposed of, to any other country or to any person other than the authorized ultimate consignee or end-user(s), either in their original form or after being incorporated into other items, without first obtaining approval from the US government or as otherwise authorized by US law and regulations [5], § 123.9(b)(1)(iv)].

The ultimate recipient must also sign a certificate stipulating that, “except as specifically authorized by prior written approval..., the foreign consignee and foreign end-user will not reexport, resell or otherwise dispose of the significant military equipment enumerated in the application outside the country named as the location of the foreign end-use or to any other person” [5], § 123.10(a)]. The State Department may require the government of the country of ultimate destination also to execute the certificate [5], § 123.10(c)].

Perhaps unsurprisingly, very similar conditions apply to items subject to the Export Administration Regulations (EAR), including the advanced computing components recently captured by the foreign direct product rule. The EAR specifically require certification by the ultimate consignee and purchaser of items subject to the regulations that.

Except as specifically authorized by the US Export Administration Regulations, or by written approval from the Bureau of Industry and Security, we will not reexport, resell, or otherwise dispose of any items approved on a license supported by this statement:

(A) To any country not approved for export as brought to our attention by the exporter; or

(B) To any person if there is reason to believe that it will result directly or indirectly in disposition of the items contrary to the representations made in this statement or contrary to the US Export Administration Regulations [3], §(a)(4)(ii)].

When the purchaser certifies that they will not dispose of an item in a way that contravenes the EAR, they contractually agree to abide by the EAR as a condition of receiving the controlled items. Indeed, the purchaser must also certify their understanding that a failure to make a truthful certification in their license application “may result in imprisonment or fine, or both, and denial, in whole or in part, of participation in US exports or reexports” [3], §(a)(4)(i)]. The importer thus accepts both the restrictions placed on the items they are purchasing and penalties for non-compliance as a contractual requirement of the purchase itself.⁵⁷ The foreign direct product rule does stretch traditional reexport and end-user controls to include not just US-produced goods and technology, but also foreign-produced goods and technology that rely on or incorporate export-restricted US goods or technology somewhere in their supply chain. Clearly, the US believes it has a national security justification for doing so. But even if one were to question the national security justification, the US has effectively insulated itself from jurisdictional issues by imposing contractual requirements on purchasers and end-users to comply with US reexport controls, including the far-reaching and arcane restrictions imposed by the foreign direct product rule. Moreover, the US is no longer alone in its use of far-reaching export controls, with the Netherlands, Japan, the UK, France, and Spain joining the US in imposing restrictions on its advanced computing technology and the EU as a whole contemplating similar steps [19,20,21, 60, 68]. These actions will serve to further solidify the place of far-reaching reexport controls and penalties within international law.

What Would a Sanctions War Look Like and What Would be its Effects?

If the sanctions deployed by the US and China are lawful, increasingly deployed, but still not terribly extensive, the question naturally arises of what sanctions would look like were the US and China to adopt a more adversarial posture. The best clues to answering that question come from the sanctions regimes that the US has developed for its clearer adversaries. The US sanctions regimes targeting Russia and Iran offer the best clues, albeit with the obvious caveat that the Russian and Iranian economies’ size and global integration are dwarfed by China. Nor do Russia and Iran possess anything approaching China’s ability to retaliate with economic sanctions of its own. Nevertheless, the US is likely to deploy many of the sanctions tools it has already developed for other adversarial contexts.

The most obvious and extreme approach the US could take would be to impose full and untargeted blocking sanctions against China in the way that the US has essentially done with Iran and Cuba. Interestingly, this would also be the simplest approach because totalizing and untargeted. By comparison, although extraordinary sanctions measures have been deployed against Russia, talk of Russia becoming “the most sanctions country on earth” belies a deeper reality: more sanctions do not necessarily mean that a jurisdiction is, in fact, sanctioned more. More sanctions rather means that the sanctions regime is more complex, targeting specific individuals, corporations, or sectors of an economy, rather than the simple but severe approach of blocking all of a country’s assets located in the US and severing all economic and trade ties. A similar approach to the one taken with Russia since 2014 is the most likely approach that the US will take with China. Indeed, many of the steps taken in US sanctions on China reflect earlier steps taken against Russia.

As detailed above, US sanctions against China have targeted individuals and companies in three main areas of concern: (1) US human rights and democracy concerns in Hong Kong and Xinjiang, (2) US concerns with China’s military and technology development, and (3) US surveillance and cyber security concerns at home. The US approach with China resembles the initial approach taken with Russia. Starting in 2014, the US restricted financing and investment in the financial services sector, energy sector, and the defense and related materiel sector of the Russian economy, while also restricting participation and provision of goods or services related to “special” oil projects with Russia [98]. These sanctions left completely untouched Russia’s traditional oil sector and the entire natural gas sector. Moreover, Russia’s major financial institutions, including its Central Bank, and all currency reserves were untouched. The sanctions approach was carefully calibrated not to disrupt the world economy, nor decouple Russia from it. Although Russian entities and individuals were gradually added over time, pressure on Russia remained relatively consistent until Russia’s further aggression in Ukraine in February 2022. Since then, US and allied sanctions have progressively “ratcheted up” pressure on Russia.

Among the tools likely to be deployed by the US against China are restrictions on new investment, first in specific sectors, as we already see with the US restrictions on China’s “military-industrial complex.” Over time, more entities within the sector will be identified and new investment bans and divestment requirements may be extended to other sectors with a similar progression. The farthest extreme of this approach, which the US took with Russia on April 6, 2022, would be a complete ban on new investment in China. Along with increasing investment restrictions, the US would be likely to expand its already extensive export and reexport controls to more sectors. The extreme edge of this approach would be a complete ban on trade with China along with an increasing web of secondary sanctions designed to deter foreign states and corporations from “backfilling” technology trade banned by the US.⁵⁸

The US is also likely to increasingly target the Chinese financial sector. We can expect initial transactional restrictions in debt and equity.⁵⁹ A further step would be stripping of correspondent banking privileges for select banks, effectively cutting them off from dollar transactions worldwide.⁶⁰ A further step still would be full blocking sanctions against select Chinese banks, which entails freezing the assets of those banks located in the US or in the possession of US banks abroad and blocking all financial transactions with US persons, including US banks. Each of these measures can be increased by extending them to more banks and potentially to all Chinese banks. By far the most extreme measures the US could take would be freezing Chinese international currency reserves and investment, which are estimated to total nearly $2 trillion in US freezable Treasury securities, asset-backed securities, and foreign direct investment [91]. These measures extend far beyond a “de-coupling” of the US and Chinese economies and entail aggressive economic measures.

Even though the US could employ extreme measures, China has an unrivaled ability to retaliate. China could retaliate both by freezing an estimated $3.1 trillion in western assets invested in China and by ceasing to service roughly $2.7 trillion of external debt held in USD and euros [91]. Additionally, the shock to international trade that would result from freezing trade with the US and with US-allied European and Asia states would be enormous. Given the nearly $700 billion in annual trade between the US and China [92], A trade and asset freeze by both China and the US would result in decreased economic activity, goods shortages, and inflation in both states [91]. Although Hung Tran of the Atlantic Council predicts that the “macroeconomic impact for the United States may be less severe than for China,” he speculates that the social and political fallout accompanying such economic shocks may well be more substantial in the US [91].

Although the US and China are already deploying and expanding sanctions against each other, the most aggressive economic measures described above are likely to be deployed only in response to an extraordinary triggering event, such as a direct military clash between the US and China, or China using military force against a US ally. Three further factors are also worth noting. First, although US sanctions are powerful on their own, they would be far less effective if the US were unable to persuade European and Asia–Pacific allies to adopt them as well. Second, were the US to go to the extreme of full sanctions against China, the effectiveness of its sanctions regime, which relies on the leverage of the US financial system and the predominance of the dollar in international reserves and commodities trading, would gradually shrink. China and other states would accelerate their efforts to develop alternatives to dollar transactions and European financial messaging,⁶¹ and the renminbi would increasingly become a reserve currency. Finally, the US economy, and the world economy more generally, would suffer enormously. The increasingly used trope of “mutually assured economic destruction” [91, 107] while hyperbolic, is nonetheless a good indication of the initial shock to the world economy and trade that would follow.

The perhaps reassuring news is that neither the US nor China are currently in a position to “decouple” from each other. Self-sufficiency in key areas of trade, manufacturing, and technology are years, if not decades away. The US remains firmly reliant on China for a host of manufactured goods and natural resources, while self-sufficiency for China in key areas ranging from agriculture to aerospace to semiconductors is still very much a project in the making [43]. As a result, neither state is in a position either to insulate itself from sanctions⁶² or to flex its strongest sanctions muscles against the other. In the final analysis, China and its Western-allied trade partners appear to be locked in a relationship of mutual dependence that will hopefully deter mutual economic destruction. What is certain is that both the US and China have tremendous domestic and global incentives to find common ground and work constructively together.

Conclusion: The Effects of a Sanctions War for International Law

Whether or not the US and China embark on a full-fledged sanctions war, their continued use of sanctions will drive the course of international law in the area of unilateral coercive economic measures. Certainly in the near term, none of the world’s three largest economies (the US, China, and the EU) show any signs of curtailing their deployment of sanctions independently of the United Nations Security Council. There is thus very little hope for an international agreement reining in unilateral sanctions that would gain the assent of the world’s largest economic players. Although most states deploying unilateral sanctions have not defended their actions with explicit opinio juris that their actions are lawful as a matter of international law, the increasingly general practice of states in this space serves to undermine the contrary claim that unilateral sanctions are unlawful. This is true despite the fact that, as noted, China frequently refers to its own sanctions activities as “countermeasures,” thus seeming to preserve the claim that its own sanctions would be unlawful were it not for the unlawful unilateral sanctions to which it is responding. As China’s own sanctions authorities and actions expand along with its use of the label “countermeasures,” they become less credible as actions always taken in response to a prior internationally wrongful act and more credibly viewed simply as retorsions taken in response to actions that China objects to, such as Tsai Ing-wen’s visit to the United States [35]. As a result, the increased use of sanctions by the US, China, EU, and other individual states will have an impact on both bilateral treaty regimes and multilateral trade treaty regimes such as the GATT and WTO. The increased use of sanctions implies that states are reading the security exceptions in those treaties expansively to permit their use of sanctions. Finally, the increased use of sanctions confirms that states do not believe they are bound by apparently conflicting UN General Assembly Declarations. State practice indicates the increasingly clear view of many states that deploying coercive economic measures belongs to their core powers as sovereign states.