Why States Continue to Trade Even During Wartime
Despite escalating tensions and strategic debates surrounding economic decoupling, history demonstrates that nations often maintain trade relationships even during armed conflict. This seemingly paradoxical behavior, explored in a recent analysis by Mariya Grinberg, Associate Professor of Political Science at the Massachusetts Institute of Technology, challenges the assumption that war automatically halts trade.
The debate over decoupling from China, or at least “de-risking” the U.S. Economy, remains central to Washington’s strategic discussions. Advocates for decoupling propose reviving domestic industries, securing supply chains with allies (“friend-shoring”), and ensuring access to critical resources. Concerns center on the potential for China to disrupt the U.S. Economy during a crisis, as highlighted by a 2025 decision by Beijing to restrict exports of certain rare-earth minerals—a move that raised alarms in Washington.
However, Grinberg’s research, drawing on historical examples from the Crimean War (1854) to the recent conflict in Ukraine, reveals a consistent pattern: states calibrate wartime trade to balance economic benefits with military considerations. The assumption that “when war starts, trade ends” is, she argues, fundamentally flawed.
During the Crimean War, Russia continued to sell raw materials needed for British industrial production to the United Kingdom. At the outset of World War I, the United Kingdom even permitted the export of machine guns to its enemies. More recently, during the 1965 Indo-Pakistani War, India exported steel, iron, and coal to Pakistan. Even in the early 2020s, despite clashes and a border standoff, trade between India and China actually increased.
The ongoing war in Ukraine provides a contemporary example. For nearly three years, from February 2022 to January 2025, Russian gas continued to flow through Ukrainian pipelines despite the ongoing conflict. Even now, Russian oil continues to transit Ukraine.
Grinberg explains that states will continue trading when the trade doesn’t significantly aid the enemy’s war effort, or when halting that trade would be damaging to their own long-term security. The timing matters: goods with a long conversion time—those that take a while to become militarily useful—are more likely to continue being traded. For example, the United Kingdom continued exporting raw materials like cotton, jute, and steel to Germany during World War I, anticipating a quick war and recognizing it would take time for Germany to utilize those materials for military purposes.
Similarly, trade in specialized goods or those with limited alternative sources may persist. During World War I, the United Kingdom periodically authorized imports of German hosiery needles, essential for the British textile industry, despite being at war.
The stakes of the conflict also influence trade decisions. In existential wars—those threatening a state’s survival—trade with the adversary is more likely to cease. However, in lower-stakes conflicts, states may prioritize long-term economic security and maintain trade relationships.
The U.S. Response to the Russian invasion of Ukraine followed a similar pattern. Initial sanctions were punitive, anticipating a swift Russian victory. As the conflict prolonged, sanctions targeted products related to Russian defense production, and eventually, intermediate goods and raw materials with longer conversion times. However, even with expanding sanctions, trade continued through third-party states, such as Turkey, Armenia, Kazakhstan, and Uzbekistan.
Western countries, not facing an existential threat, sought to minimize the economic costs of sanctions, protecting key domestic industries even if it meant indirectly aiding Russia’s war effort. Examples include Belgium delaying restrictions on Russian diamonds, and Hungary and Slovakia continuing to import Russian oil.
Applying this logic to a potential conflict between the United States and China, Grinberg argues that a complete severing of trade is unlikely. Both countries would likely allow trade in goods with long conversion times and protect trade necessary for key domestic industries. A short, limited conflict is more probable than a prolonged, existential one, further reducing the incentive for a complete trade breakdown.
Proponents of “avalanche decoupling” argue that severing ties could deter conflict, but Grinberg contends that decoupling rarely enhances security. She points out that China’s leverage is often overstated, and the U.S. Can find alternative sources for most strategic products. The economic costs of decoupling, she argues, outweigh the limited security benefits.
Grinberg concludes that policymakers should focus on realistic assessments of leverage and recognize the difficulties of completely severing economic ties, rather than pursuing costly decoupling policies that offer little security payoff. As of , the debate continues, but historical precedent suggests that trade and conflict are not mutually exclusive.
