In this Letter we investigate the response of a confined chain to a harmonic driving force. A model is introduced which mimics recent measurements on friction using surface forces apparatus. The model predicts a critical driving amplitude below which the response is linear. For higher amplitudes the system exhibits a nonlinear behavior and shear thinning. A novel origin for the thinning is proposed which stems from energy dissipation due to stick-slip motion and the transition to smooth sliding. We establish relationships between the microscopic parameters of the system and phenomena observed in rheology and tribology.