inside Iran that would otherwise be imported—which is why America’s new campaign may strengthen the regime it is trying to topple. Perhaps, therefore, what is happening is in fact an American retreat. For all his talk of destroying the Iranian threat, Mr Trump may actually be seeking to take it off the front pages. Just 31% of Americans now back continued military action. Oil prices remain high, but far below their peak; renewed fighting would push them up again. If Operation Economic Outcast causes the Iranian regime to fall (unlikely), he can declare victory. If it achieves nothing (and avoids global economic meltdown), he can at least hope for relative calm in the run-up to the midterm elections in November. Iran has a say, too. The risk is that its regime proves reluctant to bail Mr Trump out of his disastrous war. Its leaders might renew their attacks, not least because they know how much Mr Trump wants the fighting to be over and see in that an opportunity to assert themselves. Yet they may oblige, since they already feel they have got the better of the war. Iran can keep pressure on America with threats or attacks on shipping, either directly or via proxies, in the Strait of Hormuz and Bab al-Mandab. It will hope this keeps oil above $80 and spurs American voters to punish Mr Trump. Or perhaps talks with Oman will bring an agreement over fees on ships that do go through the strait—requiring America to enforce its embargo. Either way, the approach of Mr Bessent and his boss comes at a price. America may get some short-term respite from the cycle of attacks and talks that has dominated recent months. But threatening Armageddon only to unleash a damp squib will damage America’s credibility. That could leave it less able to achieve its goals in future. More important, either outcome leaves another troubling problem. Mr Trump’s approach can at best lead to a sullen stalemate in the Gulf. But Iran’s nuclear programme and its stockpile of fissile material remain. At worst, Iran might seize the opportunity to turn its attention back to its nukes. Whatever Mr Trump does—or does not—achieve with his economic warfare, the path to an all-important negotiated nuclear settlement looks ever more unreachable. ■ This article was downloaded by zlibrary from https://www.economist.com/leaders/2026/08/27/americas-new-sanctions-are-unlikely- to-topple-irans-regime
When obeying an American law means breaking a Chinese one Multinationals must prepare for a world of legal contradiction Aug 27th 2026 FOR DECADES America has sought to impose its will on companies doing business around the world—using a long, powerful, extraterritorial arm. Indeed, that is the basis of its new economic war against Iran, launched this week. These days, however, international companies also have to worry about another long arm. This one belongs to China. Under President Xi Jinping, the world’s second-biggest economy is fast learning from the biggest. One of its goals is to hit back against American pressure. But China is also mustering its weapons in order to extend its own influence. Just as the threat of excluding others from the global financial system is America’s superpower, so China has its own: its world-beating
supply chains. Companies face a new reality, of potentially being caught between two hammers. Laws written this decade and beefed up in April give the Chinese state the power to punish firms for complying with foreign sanctions. If companies cannot obey both America and China at the same time, they will be in a bind. Two big American banks, JPMorgan Chase and Citigroup, are being sued in Chinese courts for tens of millions of dollars. They are accused of following orders from America’s Treasury Department to avoid business with blacklisted Chinese entities. Other countries’ firms are caught up, too. In June China’s top court cited the new laws in ruling against a Singaporean firm for refusing to transport electronics for a Hong Kong outfit under sanctions. Other factors can also cause trouble. In April China objected to an AI startup, Manus, being taken over by Meta, one of America’s most powerful companies. It ordered the $2bn deal to be unwound even though the firm had moved to Singapore months earlier to try to escape Chinese regulation. China had no legal authority to order the deal dissolved. Though Meta’s Facebook is banned inside China, Chinese firms spend tens of billions of dollars advertising on the platform. Still, Meta complied. Barring Manus’s Chinese founders from leaving their native country seems to have helped focus minds. The Chinese armoury against corporations is growing. Authorities are working on rules designed to give them more control over the flows of Chinese-made AI technology. On September 15th new powers will come into effect that impose entry and exit bans on people. The party intends such legislation to have broad scope, intimidating its critics as well as imposing its will on firms abroad. For a typical multinational, which banks in New York and has supply chains in Shenzhen, this is a tricky path to tread. China’s dominant role in global manufacturing gives it immense clout. As well as facing civil penalties and fines, firms that fall foul of China’s rules can have assets seized and be blacklisted from working with Chinese partners.
China has in the past shown few scruples about using trumped-up charges to detain staff, whether Chinese or foreign. The legal tussles between the two biggest economic powers ratcheted higher on August 24th, when Scott Bessent, America’s treasury secretary, imposed sanctions on dozens of Chinese individuals and businesses for helping Iran sell its oil and procure dual-use technologies. China warned that it could retaliate. Multinationals have to cope in a world where they are caught in the middle. Obeying American laws will mean breaking Chinese ones, and vice versa. America’s measures are transparent, reviewable in independent courts and constrained by law. In China the laws are vague and sweeping and the courts do the Communist Party’s bidding. Executives are at risk of coercion—and of disappearing into custody. How can firms prepare? Many have hived off their Chinese operations into separate legal entities, or shut them down entirely. They can keep their most valuable data clear of China, restrict transfers of sensitive technology and ensure that operations outside China do not depend on executives or assets in the country. Supply chains should be resilient enough to prevent any single country from bringing business to a halt. Yet corporate firewalls are of limited use against a government that ignores them. Businesses will find themselves tip-toeing through minefields, deciding whose law to obey and deferring to whichever country threatens the most harm. The fracturing of the world of commerce into rival blocs continues. ■ This article was downloaded by zlibrary from https://www.economist.com/leaders/2026/08/27/when-obeying-an-american-law-means- breaking-a-chinese-one
Daron Acemoglu responds to our article Also this week safety warnings, Europe’s rivers, combating wildfires, feng shui, Wagner Aug 27th 2026 Letters are welcome via email to letters@economist.comFind out more about how we process your letter Your recent article about me, “The world’s most influential economist is oddly unconvincing” (August 17th), was striking less for its hostility towards my work than for the weakness of its claims. Critical engagement with my research and core ideas is welcome, and there is plenty in there with which one can legitimately disagree, from institutions and colonial legacies to automation and the consequences of AI. Such criticism is essential for progress in science. But this piece, instead,
assembles loosely connected grievances into an insinuation of unreliable scholarship. Let me provide three examples. First, your central verdict that I am “oddly unconvincing” rests on unnamed economists revealing their true opinion of me over a few drinks. No persons who have been offered drinks to get to this truth are named. Would you publish a letter asserting that, over a few drinks, most people tell me that your newspaper is no longer worth subscribing to? The only person quoted with such views is a blogger, Noah Smith, a thin basis for judging a lifetime of academic work. Second, the piece constructs a critique around a social-media observation by Jesús Fernández-Villaverde regarding a recent paper, “Baby busts and growth booms”, that our estimates of the effects of lower birth rates may not extrapolate to the future. We make this exact point in the conclusion of the paper. You dismiss this, writing that such caveats “can get lost and can seem unsophisticated when set against Mr Acemoglu’s reams of maths”. You did not, I understand, interview Professor Fernández-Villaverde. Third, the criticisms are cherry-picked in a haphazard manner. Some of them, for example from Tyler Cowen or Francis Fukuyama, could have been (and in fact, were in the past) the starting-point of fruitful discussions. I welcome such engagement, and I suspect that your writers know that these types of disagreements are part of a healthy academic debate. The timing is also curious, coinciding with the publication of my new book, “What Happened to Liberal Democracy?” The book explores aspects of liberal philosophy, the origins of liberal democracy’s past successes, its current crisis, and what kind of new governing philosophy could re-energise liberalism. The Economist’s review of the book, published at the same time as the article, is dismissive and declares that it “grapple[s] with the question of how AI will shape the future” (“Man’s best frenemy”, August 17th). In fact, only half a chapter is about AI and democracy. It is hard not to interpret this as a strategic framing, intended to obfuscate the message of my book and bring it to The Economist’s favourite topic of defending and boosting AI.