Rethinking sensitivity interdependence: Assessing the trade,financial, and monetary links between states

International relations scholars do not adequately conceptualize or measure economic interdependence, a crucial variable in studies of trade and conflict, economic sanctions, and globalization. Most studies conflate vulnerability with sensitivity and confuse interconnectedness with genuine interdependence by relying on inadequate indices of interdependence such as unadjusted trade as a percentage of GDP. Such measures fail to capture the true cost to states of a termination of normal trading relations and ignore completely interstate financial and monetary ties. In this article, we offer a new method, the Contextual Sensitivity Estimator (CSE), for gauging sensitivity interdependence. The CSE addresses existing shortcomings in several noteworthy ways. First, it takes into account the strategic and domestic economic context of external economic linkages. Second, it assesses the composition of trade and the uses of trade proceeds. Third, it provides a detailed conceptualization of critical channels of sensitivity like foreign investment and exchange rate ties. Using Arab‐Canadian economic relations in 1979, after a threatened boycott of Canada, as a case study, we show that our CSE yields a more accurate assessment of sensitivity interdependence than traditional measures.