Nations increasingly use sanctions and tariffs as weapons, risking a destructive race to the bottom. A new international doctrine is needed to establish rules of engagement for economic statecraft, much like the Geneva Conventions govern military conflict, to preserve the global economy.

Modern global conflict is primarily economic, not kinetic. Nations now engage in strategic warfare through currency debasement, asset seizures, and manipulating capital flows. The objective is to inflict maximum financial damage on adversaries, making economic policy a primary weapon of war.

Contrary to narratives about excess demand, the recent inflationary period was primarily driven by supply-side shocks from COVID-related disruptions. Evidence, such as the New York Fed's supply disruption index accurately predicting inflation's trajectory, supports this view over a purely demand-driven explanation.

For decades, supply chains were optimized for cost reduction. Post-crisis, the focus has shifted to security, resilience, and localization. This move away from pure efficiency by adding redundancy and increasing defense spending is inherently inflationary, reversing a long-term deflationary trend.

The era of economic-led globalization is over. In the new world order, geopolitical interests are the primary driver of international relations. Economic instruments like tariffs and export restrictions are now used as levers to assert national interests, a fundamental shift from the US-centric view where the economy traditionally took the lead.

The traditional relationship where economic performance dictated political outcomes has flipped. Now, political priorities like tariff policies, reshoring, and populist movements are the primary drivers of economic trends, creating a more unpredictable environment for investors.

The post-Cold War era of stability is over. The world is returning to an 'Old Normal' where great power conflict plays out in the economic arena. This new state is defined by fiscal dominance, weaponized supply chains, and structurally higher inflation, risk premia, and volatility.

Tariffs are creating a stagflationary effect on the economy. This is visible in PMI data, which shows muted business activity while the "prices paid" component remains high. This combination of slowing growth and rising costs acts as a significant "speed break" on the economy without stopping it entirely.

While a single tariff hike is a one-time price shock, a policy of constantly changing tariffs can become a persistent inflationary force. The unpredictability de-anchors inflation expectations, as businesses and consumers begin to anticipate a continuous series of price jumps, leading them to adjust wages and prices upwards in a self-reinforcing cycle.