Abstract: How does a dominant country systemize economic engagement vis-à-vis a rising rival when trade itself expands the rival’s capacity for political divergence? We develop a dynamic model in which a dominant and a weaker country interact over trade and policy. Without any agreement, trade is all-or-nothing: either the dominant accepts perpetual trade with full policy drift, or it refuses engagement entirely. We show that a self-enforcing relational contract expands the scope for cooperation by allowing the dominant country to use trade suspension as leverage to discipline policy deviations. \textcolor{gray}{The maximum policy concession the rising power will accept has two components: an economic component reflecting the value of revenue, and a political component reflecting the cost of being frozen short of full political capacity.} For such contracts to be sustainable, two conditions must hold simultaneously: the weaker country must benefit enough from trade to justify concessions, and, counterintuitively, the dominant country must not benefit too much, or it cannot credibly threaten trade suspension. This generates a non-monotonic relationship between trade dependence and political alignment, which leads to testable predictions for when economic engagement mitigates versus exacerbates policy conflict between established and rising powers.