Geoeconomic pressure

Christopher Clayton, Antonio Coppola, Vanessa Hu, Matteo Maggiori, Jesse Schreger and Serdil Tinda

No 1386, BIS Working Papers from Bank for International Settlements

Abstract: The increasing use of geoeconomic pressure is reshaping the global economy. We introduce a methodology using large language models (LLMs) to systematically measure the application of and response to geoeconomic pressure from large textual corpora, classifying which governments apply pressure to which foreign targets, using which in struments, firms, and products. Most importantly, we use LLMs to analyze how and why firms respond to the pressure. We focus on export controls, sanctions, and tariffs as the main instruments of pressure on firms. We find that export controls induce the targeted firms to undertake domestic R&D to build a domestic alternative technology. Western sanctions on Russia cause supply chain re-arrangements, the major beneficiary of which are firms in third-party countries, like China and India, which step into the market vacuum created by the broken business relationships. The threat and impositions of U.S. tariffs cause losses for the majority of U.S. firms, which report absorbing the cost shock on their inputs via their profit margin. Foreign firms are also negatively affected, mostly via the related macroeconomic uncertainty and the cost of relocating production.

Keywords: artificial intelligence; LLMs; economic coercion; economic security; economic statecraft; economic dependency; chokepoints; sanctions; export controls; tariffs (search for similar items in EconPapers)
JEL-codes: C4 F3 F4 F5 G3 (search for similar items in EconPapers)
Date: 2026-10
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