Economic coercion is rarely as dramatic as missiles or armies, but its consequences can be just as destabilising. The weaponisation of interdependence has become an increasingly potent tool of statecraft as globalisation has bound nations, firms and families together. With its heavily reliance on trade, international investment and global supply chains, Australia faces real risks. Policymakers must move beyond abstract debate and consider how coercion plays out at the strategic level while also affecting small businesses and households.

Economic coercion isn’t accidental; it’s the deliberate, calculated restriction of financial flows, trade, or investment to influence another actor’s behaviour. Unlike market volatility or the vagaries of supply and demand, coercion purposefully exploits vulnerabilities in supply chains, capital access or consumer dependence to achieve strategic objectives.

And while coercion can be a form of punishment, in many cases it aims to undermine social cohesion or even to set an example to deter other nations. When Beijing restricted barley and wine imports in 2020, the aim wasn’t just to send a signal to Canberra. Other countries were also supposed to understand that crossing certain political red lines carried economic costs.

At the macro level, coercion is about systems and structures. National economies buckle when core industries are cut off from global markets. Sanctions on energy exports reduce government revenue, devalue currencies and make it harder for governments to meet their sovereign debt obligations. Inflationary pressures rise, foreign reserves dwindle, and GDP contracts.

Coercion shines a harsh light on strategic dependencies. Australia’s overreliance on China as a single export market left farmers, miners and small communities exposed when trade was suddenly restricted. What appeared to be a diplomatic disagreement in Canberra ultimately translated into shuttered processing facilities in regional towns and uncertain futures for family-owned farms. Policymakers should recognise that this is about more than trade diversification itself: building resilience against coercion guarantees Australia’s agency and prosperity.

Institutions aren’t spared either. Confidence in the financial sector can be eroded by targeted measures, including exclusion from global banking systems or restrictions on capital transfers. Even if not directly targeted, Australia may get caught in secondary sanctions or broader disruptions to international financial systems. A hit to credibility or confidence can have long-lasting effects that ripple across banks, investors and, ultimately, communities.

Coercion is also about psychology and politics. Governments may try to unite the nation by framing economic punishment as an attack on sovereignty. But the more insidious risk is internal division. In democracies such as Australia, coercion can exacerbate partisan divides, deepen distrust in government and inflame conspiracy narratives. By creating hardship for farmers, small businesses and working families, coercion can corrode trust not just in foreign partners but in domestic leaders. That is the coercer’s real strategic aim: weakening a rival state’s social contract without firing a shot.

At the micro level, households experience coercion when abstract figures about inflation translate into the inability to afford groceries, fuel or medicine. For Australia’s regional communities, sudden bans on exports of beef, barley or wine are existential threats to livelihoods. Small and medium enterprises—already operating on thin margins—are particularly vulnerable. Unlike multinational corporations, they lack diversified markets or capital reserves. A single lost contract can be the difference between survival and collapse. The shuttering of a winery in South Australia or a grain silo in Western Australia ripples outward, taking jobs, community sponsorships and local services with it.

The psychological toll compounds the economic effects. Stress, anxiety and anger fracture communities. Some blame the coercive power; others blame their own government for provoking retaliation. Social cohesion is eroded long before macro statistics register a downturn. And so the coercer can weaken resolve by hollowing out trust and amplifying divisions.

Australians adapt, of course. Farmers seek new export markets, SMEs pivot towards domestic customers, and households tighten budgets. But adaptation has costs: lost markets are not always regained; new trade relationships can be more expensive; and the resilience of communities is stretched to its limits. In the long run, such shifts may blunt the effectiveness of coercion but reshape economic and social norms.

The lesson for policymakers is that macro and micro levels are not separate; they’re interdependent. Sanctions or restrictions only succeed strategically if the micro-level pain is severe enough to generate political pressure. Conversely, widespread adaptation and resilience at the household or business level can neutralise coercive strategies, blunting the macro strategy. Australia must build resilience not only in supply chains and institutions, but also in the adaptation capacity of families, SMEs and regional communities.

The television series Succession is an informative example as the Roy family wields financial leverage to bend rivals and allies. But the show makes clear that power is never just about balance sheets; it’s also about perception, emotion and the ability to adapt or break under pressure. Economic coercion operates similarly: the macro spectacle matters, but the decisive battles are fought in boardrooms, kitchens and corner shops.

Australia and its partners must therefore design responses that acknowledge both levels of risk. At the macro scale, it is essential to diversify export markets, invest in resilient supply chains and strengthen financial institutions. However, resilience is hollow if it ignores how coercion is experienced at the micro level. Supporting SMEs to diversify exports, ensuring regional communities have safety nets and bolstering public trust in institutions are just as vital.

Economic coercion is powerful precisely because it straddles the strategic and the personal. To withstand it, Australian policy must do the same.