Strong commercial ties promote peace as states shun the opportunity costs of economic disruption. However, trade also enriches and empowers states, rendering them more capable of enforcing long-term settlements. Given economic disruption does not last forever, countries can be incentivized to trade short-term economic losses for long-term political or territorial gains. This trade-off can restrict or even reverse the pacifying effect of commerce as it renders states incapable of committing to existing peaceful deals. I argue the scope condition hinges on the security externalities of trade, defined as states' (latent) abilities to translate trade gains into military power. When a country's trade externality relative to her opponent's is at the extremes, more bilateral trade can be peace-promoting. However, when the relative externality is in a mid-range, increasing bilateral trade can exacerbate commitment problems leading to a higher likelihood of costly conflict. I test the implications on a sample of countries comprising strategic rivals and major powers, finding supporting results.