This week on Integrated Strategy we’re taking a high-level look at those models. The following note is adapted from a longer essay with Harry Halem in the current issue of the Texas National Security Review, which in turn is adapted from our book The Arsenal of Democracy: Technology, Industry, and Deterrence in an Age of Hard Choices. (Get your copy here.)

We apply these lessons to cover the entire U.S. military deterrence system against China—in an overview short enough that you can grasp it quickly.

Key takeaways:

• Our margin of deterrence against China is rapidly shrinking.

• The problem isn’t a failure of US technological innovation. It’s that the allied defense industrial base (DIB) is struggling to field and sustain cutting-edge capabilities at scale, at speed, and under pressure.

• The United States must urgently expand its defense industrial base, but it will fail unless it works in coordination with allies.

• The top priority: systemic vulnerabilities that represent our fastest path to defeat: our increasingly brittle scouting (C4ISR) and logistics networks.

• The most time-sensitive industrial investments: munitions, drones, and submarines.

• Stabilizing the negative trend in the military balance does not require a doubling of the defense budget. We need a whole-of-system effort by the Pentagon and Congress, a one-off chunk of money to recapitalize the right parts of the DIB, and a political mandate to make hard choices.

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The Timing and Nature of Technological Offsets

China’s military modernization is designed to undermine the foundations of American military superiority. Washington and its allies must therefore pursue an industrial-technological transformation to offset China’s strategy.

History offers no ready-made formula, but it is useful for framing current choices and understanding their potential costs and benefits.

Option 1: The “Dreadnought Offset”

This is the boldest approach: wipe the slate clean by betting on a high-tech bundle to completely outclass current standards.

When the British Royal Navy deployed the HMS Dreadnought in 1906, it instantly rendered every existing battleship obsolete—including Britain’s own. When successful, a Dreadnought offset can neutralize an adversary’s quantitative momentum by making existing investments irrelevant.

HMS Dreadnought upon its commission, 1906

The risk: if implementation slips, the transition period can create soaring costs and acute vulnerability.

The US military today carries the battle scars from a messy attempt at a Dreadnought offset. In the 2000s, Secretary of Defense Donald Rumsfeld sought to transform the Joint Force by replacing heavy land forces and mass with airpower, precision, stealth, and autonomous systems.

It was a daring bet on largely the right technological trends, but the initiative was poorly executed. The Joint Force failed to coordinate the offset effectively, partly because the Global War on Terrorism diverted bureaucratic bandwidth. Key programs arrived years late and grossly over budget. By the time the Joint Force began to reap the fruits of Rumsfeld’s vision—nearly twenty years later—China was already implementing the same solutions and fielding new tools to offset America’s advantages. This is a key reason why the Pentagon has resisted the current defense tech revolution.

Option 2: The “Torpedo Boat offset”

The other extreme. Integrate new technologies with legacy platforms to make the existing force more effective.

In the late nineteenth century, many strategists believed that the small, cheap, mass-produced torpedo spelled the end of the large, expensive battleship, predicting that it would equalize the Royal Navy’s structural advantages. This debate echoes current discussions about emerging threats from drones.

A French type 63 torpedo boat at Toulon, 1884

But the torpedo’s proponents were wrong. Big navies countered the threat by creating “torpedo boat destroyers”—the progenitors of today’s guided-missile destroyers. Working together with battleships, they could easily destroy the small torpedo-laying vessels—including by using torpedoes themselves.

The result was a more complex but ultimately more capable naval system that remained the standard for fifty years.

A British Havock-class torpedo boat destroyer, 1893

“Historical military offsets reveal a clear pattern: Industrial capacity, technological R&D, and doctrine must be aligned over time and across institutions.”

Option 3: The “Second Offset” model

This is the middle path. In the 1970s and 1980s, the Carter and Reagan administrations placed command, control, communications, computers, intelligence, surveillance, and reconnaissance (C4ISR) at the center of US military transformation.

The Second Offset leaned heavily on legacy platforms—but built a new enabling layer that transformed how they were used. This enabled radically new operational concepts. For example: GPS.

The key to this model is mastering coordination between technological development and doctrinal innovation so that the new layer can integrate seamlessly.

Conclusions

Historical military offsets reveal a clear pattern: Industrial capacity, technological R&D, and doctrine must be aligned over time and across institutions. History offers no off-the-shelf model to copy, but successful transformations require integrated strategy and policy coordination.

No single actor—not the White House, the Pentagon, Congress, industry, or allies—can dictate terms. These parties must find ways to work together, starting with a common operating picture of the deterrence system. Our work aims to provide that picture.

To learn more about how these lessons apply across the deterrence system, from space to submarines, read our full TNSR piece here.

Also much more on these topics in my forthcoming book Defending Taiwan: A Strategy to Prevent War with China, out April 14 through Oxford University Press. You can pre-order here and get 30% off with the code.

Pre-order a hard copy here.

A force that cannot see the battlefield cannot win on it. The battlefields of Ukraine have made this clear. Commercial sensors, cheap drones, resilient communications, and fast adaptation are imposing disproportionate costs on a larger foe. Both the Russian and Ukrainian sides are adapting their platforms and iterating their tactics and techniques faster than any other military in history. The implications for the Indo-Pacific are alarming.

The lesson isn’t that “drones beat ships.” It’s that reconnaissance, counter-reconnaissance, and rapid replenishment decide campaigns.

America’s vulnerability is not a shortage of ideas. It’s a shortage of capacity and a tangle of institutions that prevent us from translating ideas into fielded capability at the speed required. Deterrence is a system. Our system consists of resilient C4ISR, credible long-range strike, hardened and supplied positions, and a robust allied defense industrial base. Deterrence means showing the ability to make that system work faster. It is about delivering a powerful opening punch—and sustaining the fight for as long as it takes.

To execute this relatively simple mission, we have a procurement system that is maddeningly, wastefully complex. After the Cold War, we consolidated the DIB, leaving a handful of primes to manage decades-long mega-programs. Enormous, long-term contracts necessitated labyrinthine requirements and piles of red tape. Meanwhile, our shipyards aged, our energetics capacity shrank, and our munitions stockpiles thinned. Our industrial base lost its capacity, and more importantly its agility.

China is not encumbered this way. That’s how it has quickly built the world’s largest navy, scaled production in missiles, drones, and air defense, and created redundancy for refit and repair in wartime. The industrial momentum today favors China. If Beijing concludes it can outproduce and outlast the United States in a war of attrition, deterrence weakens.

History suggests the way back for the United States and its allies. Shortly before World War II broke out, we made a national decision to suspend “business as usual” and take all necessary measures to expand our arsenal. In the 1970s and 80s, we made a similar decision, but to adapt the force for a new generation of new sensors, digital technologies, and space-based communications. The “Second Offset” worked because it integrated emerging technology into doctrine and operations. To keep China deterred today, we need technological integration plus industrial capacity.

That requires tearing out the parts of the acquisition system that are hostile to time.

First, change the default. Start with commercial. When a field-ready capability exists, DoD should buy it under commercial pathways rather than launch a bespoke program. The point is not ideology; it’s time. Every month shaved off procurement and fielding improves deterrence.

Second, change the process. Fund portfolios of competing prototypes, measure against effects and time-to-fielding, and scale the winners. Reform past-performance rules that entrench incumbency; they block the very competition that keeps timelines honest.

Third, change the culture and cost of entry. Non-traditional contractors face a compliance moat designed for yesterday’s programs. Lower it—especially for firms spending their own capital on dual-use R&D—without compromising security. We need more builders in the system, and we need to retain the talent.

Fourth and most importantly: change the incentives. Acquisition officials should be rewarded for delivering capability on operationally relevant timelines, not for process compliance. Align KPIs to speed, availability, and actual fielded effects. Congress and DoD must send clearer demand signals. If they want the defense tech startup ecosystem to keep thriving, they need to provide a pathway for companies to cross the valley of death.

Taken together, these reforms will enable a historic capacity build. But they will not solve deterrence on their own. A credible arsenal is not “little tech versus big ships.” It is both:

• Heavy end (multi-year commitments): Expand energetics and munitions lines; clear yard backlogs; stabilize submarine production; harden and pre-position stocks forward. This is unglamorous, years-long work—but without it, magazines empty and ships wait for parts.

• Agile end (high-tempo adoption): Flood the force with attritable UAS, autonomy for sensing and counter-targeting, resilient comms/mesh networks, and rapid counter-UAS—capabilities that iterate on commercial cycles but are integrated to military concept of operations.

Logistics binds the two. In the Pacific, lift, pre-positioning, repair, and re-arm at sea are the limiting reagents. Buying clever sensors that can’t be sustained, or exquisite platforms that can’t be re-armed, is theater, not deterrence. Rethinking logistics for an era of long-range strake is an enormous task. Smaller, nimble companies have an enormous role to play.

Allies must also be part of the story. Japan, South Korea, Australia, the UK, and European producers are increasing defense spend, but without harmonized production and joint orders, and facing restrictive export controls, we leave capacity on the table. The United States should lead joint production agreements and co-investment in key bottlenecks (energetics, seekers, solid-rocket motors, maritime repair). Even partial integration in the next five years would meaningfully raise the cost to Beijing of gambling on a long war. It would also provide a valuable demand signal to industry by combining American and allied needs. Reciprocity is key, because American defense tech companies will want to sell into these markets, too. ITAR and other red tape stand in the way.

Founders and engineers building dual-use tech can help bring about the change the system urgently needs. Here’s what founders can do:

• Map to the kill chain, and stay historically informed. Be prepared to explain to DoD exactly how you fit into the overall deterrence system. Are you improving sensing, target custody, strike, or sustainment? How have these parts of the kill chain been disrupted by emerging tech in the past? Why is your product next?

• Design for the portfolio world. Aim for an 80% solution fast under OTAs/DIU while engineering the path to program-of-record scale. Most likely, the system will be reformed piecemeal, not all at once. But you can’t be sure.

• Engineer for attrition and repair. Assume contested EW, degraded GPS, and a repair loop forward. How can you adapt and iterate faster than your competitors?

The goal of defense tech should not be to “disrupt defense,” unleashing “creative destruction” along the way to a technological revolution. It should be to restore credible deterrence by helping the force see, shoot, move, and replenish faster than a peer adversary can adapt. Congress can help by making commercial the default, institutionalizing portfolio acquisition, lowering barriers to entry, and tying incentives to speed and availability. The Pentagon must, in parallel, place multi-year bets on the heavy industrial base while clearing the lanes for agile tech to flow.

At a moment like this, we need to build the broadest possible consensus about what needs to be done, and why. We should take inspiration from 1940, after France fell to the Nazis, when FDR finally realized that we needed a crash effort to defeat Germany and deter war with Japan. In his famous “arsenal of democracy” fireside chat, FDR told the American people: “We must discard the notion of business as usual.” The tragic irony of history is that Roosevelt was right, but he moved too late. Deterrence failed in 1941. We shouldn’t make the same mistake today.

In April, Beijing quietly reminded the world how much leverage it has over the allied industrial base.

After Washington rolled out a new round of tariffs on PRC EVs and batteries, PRC regulators responded by tightening export controls on several rare earths and processed minerals. Within weeks, procurement managers across North America, Europe, and East Asia were scrambling. A handful of factories in sectors that have nothing to do with EVs—electronics, specialized alloys, even defense components—started talking about scaling back shifts or retooling.

Beijing never had to announce a “sanctions package.” It just had to make life difficult for a few under-the-radar firms that depend on PRC refiners and processors, and let the fear of escalation do the rest.

This is the new face of economic coercion: not a dramatic embargo, but targeted interventions in thin, opaque markets where one country—China—controls an overwhelming share of processing capacity. In some critical minerals, that share is over 90 percent. Even where mining is geographically diverse, the chokepoint is in refining and separation, and that chokepoint often sits on the Chinese mainland.

If deterrence is about convincing an adversary that war would be too costly, this is a glaring vulnerability. In a crisis over Taiwan, we should assume Beijing would use every lever of coercion short of war before crossing the nuclear threshold. Right now, that includes the ability to kneecap pieces of the U.S. and allied industrial base at will.

The question is not whether we can “de-risk” from China entirely. It’s whether we can design institutions that make this kind of coercion less effective—so that a bureaucratic decision in Beijing can’t shut down our factories next quarter.

That’s where the idea of a multilateral commercial stockpile for critical minerals comes in.

The limits of one-company-at-a-time industrial policy

Washington has not been asleep. Over the last few years, the U.S. has started to admit—in legislation rather than white papers—that market forces alone will not deliver adequate resilience in critical minerals.

The One Big Beautiful Bill commits on the order of ten billion dollars to shore up supply chains for critical minerals and related inputs. The Pentagon is already experimenting with new tools: taking an equity stake in MP Materials, providing guaranteed offtake and price floors to help it scale up rare-earth magnet production in the United States. The basic logic is sound. If Beijing can crash prices whenever a non-PRC project threatens its market share, you need some form of public backstop to keep those projects bankable.

But there are two problems with this ad hoc approach.

First, it doesn’t scale. The U.S. economy and its allies consume on the order of several billion dollars a year in just the most strategically important minerals—gallium, germanium, graphite, magnesium, tungsten, and so on. You can’t negotiate a bespoke MP-style deal for every mineral and every firm. The transaction costs alone would be enormous, and you’d quickly run up against political resistance to what looks like permanent corporate welfare.

Graphite production in South Korea

Second, and more fundamentally, it doesn’t fix the underlying structure of the market. For many critical minerals there isn’t a liquid, transparent spot market at all—just a patchwork of bilateral contracts and long-term offtake deals. That opacity makes it easier for Beijing to disguise coercion as “regulatory action” or “ordinary market volatility,” and harder for investors to price the risk of non-PRC projects.

We are trying to address a systemic problem—a concentrated, politically captured supply chain—with piecemeal tools. We need something that operates at the level of the system.

A commercial stockpile, not a command economy

The idea I’ve been working on is a Multilateral Commercial Stockpile (MCS) for critical minerals: a U.S.-led, sovereign-backed but privately operated mechanism to stabilize markets and blunt Beijing’s leverage.

The concept is simple.

1. Buy low in peacetime.

   The stockpile would accumulate roughly twelve months of normal peacetime demand for a short list of high-priority minerals across participating countries. Purchases would happen when prices are stable or depressed—often precisely when PRC firms are dumping product to drive non-PRC competitors out of business.

2. Release during coercion or crisis.

   When China imposes export controls, orchestrates a price spike, or otherwise weaponizes its market power, the stockpile would sell into the market. The goal is not to suppress prices forever, but to buy time—to smooth shocks, avoid panic, and give alternative suppliers a chance to come online.

3. Anchor real markets.

   By guaranteeing that there is always a buyer and seller of last resort, the stockpile underwrites the creation of deeper spot and futures markets for minerals that currently trade in thin, clubby channels. It turns a political weapon into a tradable asset class that can be hedged.

Crucially, this is not about turning Washington, Brussels, or Tokyo into central planners for the metals trade. The MCS would not fix prices or dictate who mines what where. It is a piece of market infrastructure—more like a central bank backstop for a fragile financial market than a Soviet five-year plan.

You could imagine starting with a core list of perhaps twenty minerals where three conditions are all present:

• High strategic importance for defense and clean energy;

• Heavy PRC dominance in processing or refining;

• Underdeveloped, illiquid markets.

The aim is to change the incentive structure for private investment. If you’re a mining or processing firm in Australia or Canada, or a Western-financed project in Africa or Latin America, you should be able to look at the existence of the MCS and say: “Even if Beijing tries to crash the price, there is a floor under this market. The allied governments literally have skin in the game.”

Why this has to be multilateral

In theory, the United States could try to solve the problem by going it alone: subsidize enough domestic mining, refining, and recycling to make itself self-sufficient in every critical mineral that matters.

In practice, that would be slow, expensive, and politically fragile. It would also leave our allies exposed. If Japan or the EU remain heavily dependent on PRC processing and we do not, Beijing will simply redirect its coercive pressure toward them. In a crisis, the weakest link defines the strength of the chain.

A better strategy is to lean into allied comparative advantage.

The G7 has committed to the guiding principles in theory, but there is still no allied-scale coordination on stockpiling.

Japan already runs a commercial stockpile of oil and certain minerals through JOGMEC and has decades of experience using it to stabilize markets. The EU has finally woken up to its raw-materials vulnerabilities and is experimenting with joint purchasing schemes. Canada, Australia, and several Latin American and African producer states have both geology and political will to diversify away from China—but they need durable demand signals and financing structures to make non-PRC projects real.

A U.S.-led MCS offers a way to knit these disparate efforts together.

• It spreads the cost of stockpiling across a broad coalition of countries that all benefit from a more resilient minerals ecosystem.

• It creates an institutional platform for long-term industrial co-dependence among democracies, much as NATO and post-war trade agreements did in their day.

• It sends a clear strategic message to Beijing: the days when you could threaten individual allies one by one through commodity leverage are ending.

For the United States, there is also a simple economic logic. It is cheaper and more efficient to tap an existing Australian mine or a Japanese refining facility, backed by a shared commercial stockpile, than to try to reproduce every link of every value chain on U.S. soil.

Learning from past stockpile failures

Skeptics will point out that commodity stockpiles have a checkered history. They are not wrong.

The U.S. National Defense Stockpile, created after World War II, gradually drifted from its original purpose into a grab bag of programs that propped up inefficient domestic producers. International commodity agreements for tin and rubber tried to peg prices within fixed bands, but broke down under the strain of market shifts and free-riding. The Federal Helium Reserve famously over-bought, then was forced by Congress to dump its holdings at fire-sale prices, damaging the very private industry it was meant to support.

The National Helium Reserve in Amarillo, TX

These are real failure modes. But they are also design problems we can avoid.

Three principles matter.

First, float—don’t fix.

The MCS should not peg prices. It should intervene only when there is credible evidence of coercive behavior or extreme volatility: export controls aimed at a specific partner, price moves that cannot be explained by fundamentals, or documented shortages among key industrial users. That implies building a transparent technical framework—using moving averages, inventories, and independent analysis—to trigger action, rather than leaving it entirely to politics.

Second, capitalise for the full cycle.

A stockpile that is forced to sell at the bottom of the market because it runs out of cash is worse than useless. The MCS needs to be capitalized—through a mix of government seed money and private finance—to ride out full boom-bust cycles in these commodities. Think of it more like a conservative, over-collateralized hedge fund than a discretionary spending program.

Third, separate strategy from operations.

To keep politics from turning the stockpile into a slush fund, governance has to be hybrid. A Sovereign Board of member governments sets the priority minerals list, target stockpile levels, and broad rules of engagement. A Commercial Operations Board, with representation from private operators and technocratic agencies, executes purchases, storage, and releases under those rules. Governments decide what to do; firms decide how to do it.

If you do these things right, a commercial stockpile stops looking like a throwback to the 1970s and starts looking like a modern risk-management tool targeted at a very specific problem: one actor’s ability to weaponize its dominance in a set of thin, strategic commodity markets.

How it would actually work

Concretely, you can imagine the Multilateral Commercial Stockpile working something like this.

Participating governments sign a framework agreement establishing the Sovereign Board and authorizing contributions—in cash, guarantees, or in-kind inventory. In the U.S. case, existing authorities like the Defense Production Act provide a legal home and initial funding. Other members plug in through their own instruments.

The Sovereign Board then:

• agrees a priority minerals list and target stockpile levels (for example, one year of normal demand for the top tier, less for lower tiers);

• sets broad release criteria (linked to export controls, price behavior, and evidence of industrial distress); and

• authorizes the issuance of contracts to Private Stockpile Operators.

The Private Stockpile Operators are selected through competitive processes, ideally using flexible contracting mechanisms rather than standard procurement. Their job is straightforward:

• purchase designated minerals on exchanges and via offtake deals;

• store them in specified facilities in the U.S. and allied countries;

• manage rotation and quality control; and

• stand ready to execute releases when the Board’s criteria are met.

On the demand side, industrial firms in member countries pay an annual premium—effectively an insurance fee—based on their prior use of covered minerals. In exchange, they receive options to draw from the stockpile at pre-defined terms during disruptions. The premiums help cover operating costs and provide market discipline: if nobody is willing to pay for coverage on a given mineral, maybe it doesn’t belong on the priority list.

Financing the stockpile’s working capital can be done through standard tools. The initial sovereign seed funding leverages private debt, secured against the physical stockpile and the stream of future premiums. Because the MCS is not trying to make speculative profits—just to stabilize markets—its risk profile should be attractive to conservative institutional investors.

From the point of view of a mid-sized manufacturer in Ohio, Bavaria, or Osaka, the experience would be simple. You sign up, pay your premium, and in a crisis you know that:

• you will be able to access at least a percentage of your normal mineral needs at a tolerable price; and

• you are not on your own negotiating with PRC suppliers under duress.

Deterrence by institution-building

Why does this belong in a Substack about “integrated strategy” rather than a trade journal for mining executives?

Because the stakes are fundamentally strategic.

China’s dominance in critical minerals is not an accident of geology. It is the result of deliberate, decades-long industrial policy, backed by state finance, environmental arbitrage, and the willingness to run plants at low margins to capture global market share. That dominance gives Beijing a powerful lever to inflict economic pain without crossing the threshold of armed attack.

If the United States and its allies do nothing, that lever will only grow more powerful as the energy transition, electrification, and defense modernization increase our demand for these minerals.

A Multilateral Commercial Stockpile is not a silver bullet. It does not eliminate the need for new mines, new refineries, better recycling, or smarter environmental trade-offs. But it does three things that matter for deterrence:

• It raises the cost of coercion for Beijing by ensuring that export controls and price spikes inflict less immediate pain.

• It reduces the risk of panic policy in our own capitals, by providing a predictable playbook and cushion when shocks hit.

• It deepens allied integration around a strategically critical set of supply chains.

In other words, it is precisely the kind of institutional innovation we should be pursuing if we are serious about aligning our diplomatic, economic, military, and technological policies for long-term competition with China.

The last decade was about discovering our dependencies. The next decade has to be about designing the institutions that make those dependencies survivable—or obsolete.

A serious, multilateral commercial stockpile for critical minerals won’t solve every problem in the U.S.–China relationship. But it’s one of the few tools that directly targets one of Beijing’s sharpest instruments of coercion. It’s time to build it.

In any conflict with China, America’s most critical vulnerability wouldn’t be its destroyers, stealth bombers, or submarines. It would be the unglamorous network of ships, aircraft, and supply depots that keep them fighting. Logistics — the bridge between the national economy and combat forces — is the weakest link in the American deterrence system.

After decades of neglect, this bridge is crumbling, and Beijing knows it. Deterring China requires the US build up not only front-line combat forces, but also its logistical infrastructure.

The USNS Pollux (T-AKR-290) in the port of Pusan, South Korea. Launched in 1973, the Pollux is one of the Ready Reserve Force’s 130 active logistics ships.

The US logistics enterprise is optimized for peacetime efficiency, a euphemism for cost-cutting. American maritime logistics system, essential for sustaining a fight across the vast Pacific, is particularly brittle and unprepared for a protracted conflict. During World War II, America commanded over 6,000 merchant ships to supply allied forces. Today, fewer than 200 US-flagged oceangoing commercial vessels remain.

The decline is systemic. The Military Sealift Command, the Navy’s logistics backbone, faces such severe personnel shortages that it is decommissioning ships it cannot crew. The Ready Reserve Force, the US surge fleet for emergencies, is a floating museum; the average ship is over 40 years old, with many struggling to meet activation deadlines due to poor maintenance. This hollowed-out force would likely become a top target in the opening hours of a war.

This logistical deficit directly undermines deterrence. While the best public wargames suggest the US would win a war against China today, Washington’s advantage is shrinking. As INDOPACOM commander Adm. Samuel Paparo notes, we are operating on “narrowing margins.” China’s leaders may believe they could triumph in a long war by simply wearing out US supply lines. For example, Beijing could mobilize its forces and keep them at a high state of readiness, forcing the US into a costly, draining counter-mobilization that exhausts our logistics before a shot is even fired. If Beijing believes we lack the endurance for a protracted fight, it may be tempted to start one, assuming our will — and that of our vulnerable allies — will crumble over time.

History offers a stark warning. President Franklin D. Roosevelt’s 1940 decision to move the Pacific Fleet to Pearl Harbor was meant to deter Japan. But the forward-deployed fleet was not logistically supported for sustained combat. This vulnerability didn’t deter Japan; it invited attack. Today, we risk repeating this mistake on a grander scale, deploying forces without a credible plan to sustain them under fire.

The “tyranny of distance” in the Indo-Pacific. Guam is as far from Taipei and Tokyo as New York is from Salt Lake City. Resupplying U.S. and allied forces dispersed across this huge area is an enormous task.

While the challenge is immense, it is not insurmountable. Averting a logistical catastrophe requires urgent, targeted action in three areas.

Partner with allies to build a resilient, shared logistics network. Japan and South Korea have world-class shipyards and robust merchant marines. They can help expand our sealift and tanker capacity through co-investment and commercial contracts—while sharing some of the cost. The Trump administration is already wisely exploring these options. Additionally, allies like Australia, the Philippines, and Palau can host more forward-positioned and hardened facilities for repair, rearmament, and resupply. Washington should also pressure key allies to massively expand their own strategic stockpiles of food, fuel, munitions, critical minerals, and essential components. Deterrence in the Pacific is a team sport.

Refocus domestic investment on our logistics ecosystem. The Pacific Deterrence Initiative (PDI), a congressional fund created to bolster our posture in Asia, has become a grab bag for unrelated priorities. It must be refocused laser-like on logistics. Congress should give US Indo-Pacific Command more direct control over PDI funds to build the hardened, distributed network needed to operate within range of China’s missiles.

Start revitalizing our national maritime enterprise. This is a generational project, which is why allied cooperation is essential for the foreseeable future — but the work must start now, in earnest. Congress must fund the modernization of the Ready Reserve Force’s aging fleet, increase capacity at the US Merchant Marine Academy to train a new generation of mariners, and reform pay scales to retain essential workers. While Congress is at it, this would be an optimal time to recapitalize the submarine industrial base. The stronger the US deterrent force undersea, the less important surface logistics will become.

The costs of rebuilding our logistics capacity are substantial, but they pale in comparison to the cost of failure. By using the next annual defense budget to invest in resilient regional logistics, Washington can send an unmistakable, bipartisan signal to Beijing that China has no quick and easy pathway to dominate its neighborhood by force.

The essential bridge between economic might and military effectiveness must be restored as a foundational pillar of our national strategy. It is the delivery system for the arsenal of democracy.

Gary Roughead, former U.S. Navy Chief of Naval Operations and Commander of the US Pacific Fleet, calls it “by far the best appraisal of deterring and, if necessary, prevailing in a naval and air conflict in the Indo-Pacific.”

The book is a historically grounded guide to deterring war with China through industrial production, emerging military technologies, institutional reform, and cooperation with allies.

We’re hoping it will become a standard reference text for students, policymakers, investors, and defense tech industry leaders.

Thanks to generous funding from the Hoover Institution, the book is freely downloadable. If you’d like a hard copy, you can buy one at the Amazon link here:

Order the book here

Launch details

Over the past two months, we have soft-launched the book through extensive private and semi-public engagement with policymakers in allied countries.

The reception has been incredibly positive. We will continue to talk about the book in public and private events in the coming weeks as the final text of the 2026 National Defense Authorization Act comes together.

Here’s me and Harry discussing the book in Washington at a closed event in September, in conversation with Adm. Ellis, the former U.S. STRATCOM commander.

We had a closed event today at the London School of Economics and more programming coming in Washington later this month. More details to follow on our Stanford campus launch on November 20, moderated by Stephen Kotkin.

In future weeks, the Integrated Strategy substack will dive more deeply into the book’s specific findings and recommendations. Today, just posting this high-level overview of what the book covers:

About the book

The US military stands at a moment of profound risk and uncertainty. China and its authoritarian partners have pulled far ahead in defense industrial capacity. Meanwhile, emerging technologies are reshaping the character of air and naval warfare and putting key elements of the US force at risk. To prevent a devastating war with China, America must rally its allies to build a new arsenal of democracy. But achieving this goal swiftly and affordably involves hard choices.

The Arsenal of Democracy is the first book to integrate military strategy, industrial capacity, and budget realities into a comprehensive deterrence framework. While other books explain why deterrence matters, this book provides the detailed roadmap for how America can actually sustain deterrence through the 2030s—requiring a whole-of-nation effort with coordinated action across Congress, industry, and allied governments.

Rapidly maturing technologies are already reshaping the battlefield: unmanned systems on air, land, sea, and undersea; advanced electronic warfare; space-based sensing; and more. Yet China’s industrial strengths could give it advantages in a protracted conflict. The United States and its allies must both revitalize their industrial bases to achieve necessary production scale and adapt existing platforms to integrate new high-tech tools.

Chapters explore the key domains of modern military power, including:

• Scouting, which will determine success or failure in any US-China war

• Logistics, the greatest vulnerability in US force posture

• Munitions and drones, which the allies must produce at scale

• The fleet, which is racing to stay relevant against fast-evolving threats

• The defense industrial base, which allied nations should reform and rebuild together

• Space and nuclear, where emerging technologies are shifting the strategic balance

The book concludes with a call for urgent action. Unless policymakers recognize the scale of the challenge and take decisive steps to modernize US force structure and procurement processes, deterrence could fail—leading to potentially the most catastrophic conflict in modern history. This balanced, comprehensive, and actionable book is the essential implementation guide for policymakers, defense officials, investors, and strategists.

Thanks for reading!

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Last week, President Trump threatened 100% additional tariffs if China goes does not withdraw the measures by November 1. But China held firm, markets took fright, and the administration is already backpedaling. It feels like Liberation Day all over again. This emerging pattern of trade scare —> market panic —> hasty truce is shredding U.S. credibility. In a number of essential products, the United States is so dependent on China that decoupling all at once isn’t an option. But what’s the alternative—leaving things as they are?

There’s a solution to this problem. It’s called avalanche decoupling. This week, we explore how it works—and why it’s needed now.

The Strategic Challenge

China announced its new export control regime just weeks before Trump and Xi were set to meet in Korea. Why is Beijing not negotiating in good faith? Because it believes U.S. decoupling threats are hollow. Beijing has long suspected this, but the April “Liberation Day” fiasco was a key data point that confirmed Beijing’s assessment. The Trump administration came out swinging, briefly imposing tariffs of 145%. But then the bond market revolted, and the administration within days found an excuse for a “pause”—which it converted into a sustained truce through hurried bilateral talks.

China drew the obvious conclusion: America has no way to achieve rapid decoupling. The consequences are to politically and economically painful for Americans to bear. Thus, Beijing has all the leverage. It can weaponize its role in essential supply chains with impunity.

U.S. allies are caught in the middle. Many—including the presumptive next prime minister of Japan, Sanae Takaichi, now recognize that China is no longer a reliable supplier for critical goods. Allies are prepared to join the U.S. in partial decoupling. But these countries are vulnerable to retaliation, and they will not pursue their own ambitious decoupling agendas without credible assurances that the American policy direction will be sustained.

The pattern of dramatic announcements followed by quick reversals provides exactly the wrong message to allies. No country will take on the costs and risks of restructuring supply chains if U.S. policies are likely to reverse with the next market downturn or election cycle.

The solution is to reject the binary between abrupt, total decoupling and continued reliance on China for critical goods. Instead, Washington must demonstrate a proof of concept for graduated, managed disengagement in critical sectors where PRC leverage poses unacceptable risks.

This week’s essay is adapted from our essay “On Day One: An Economic Contingency Plan for a Taiwan Crisis.”

The Avalanche Mechanism

The idea of avalanche decoupling originated in our July 2024 report “On Day One,” about contingency planning for a Taiwan crisis. Originally conceived as a crisis tool, it also works in peacetime, because it can be calibrated to work at any speed and scale.

The idea of avalanche decoupling is simple: decouple in a way that creates minimal disruption on Day One but gains unstoppable momentum over time. Rather than repeatedly taking big tariffs on and off, allied nations should start from zero and raise tariffs gradually and automatically by predictable increments (probably 3–8% monthly, depending on the product). Alternatively, they can use quotas that ratchet down at predetermined rates (say, 2–5% monthly). No arbitrary decisions, no negotiations about the schedule itself. Just set the clock and let it crank until decoupling is achieved.

A more predictable schedule for rising tariffs would transform the risk picture and incentives for businesses that buy goods and components from China. When high tariffs are imposed suddenly, firms’ incentives are not necessarily to move their supply chains. In fact, sometimes they’re the opposite: to ring alarm bells and threaten politicians with production shutdowns and soaring prices unless the tariffs are taken off as soon as possible. But if firms start low and rise gradually, there are no shortages or inflation shock on Day One. Firms will know they are less likely to be taken off in the future. The rational response is to get to work pulling supply chains out of China.

Additionally, creating a predictable pathway for tariffs will help mobilize capital markets to support decoupling. If investors think tariffs may not be sustained, they have little incentive to invest in production outside of China that might not be profitable when tariffs go away. But if they gain confidence that allied nations are on track to decouple in a given product—whether it be over two years, or five, or eight— capital markets will start rewarding firms investing in non-China production right away. The shift of production out of China therefore happens gradually, but market forces help it gain momentum over time—like an avalanche.

How fast tariffs move can be calibrated by sector. We might want to set critical mineral tariffs to rise by 5% monthly given urgent security concerns, while medical devices and pharmaceutical inputs might rise at 2–3% to limit price pressure on consumers. The details are negotiable. The key is that the avalanche is triggered once, and then runs by itslef.

The United States can execute avalanche decoupling unilaterally, but coordination with allies multiplies effectiveness while distributing adjustment costs. When multiple markets join the avalanche, they all reduce the pressure on their own consumers while increasing the pressure on Beijing.

Priority Sectors for Implementation

Four sectors demand immediate avalanche treatment based on security risks and availability of alternative suppliers:

• Refined critical mineral products, especially rare earth magnets. China controls over 90% of processing and magnet production—chokepoints for everything from cars to F-35 fighter jets. Allied countries need to stand up an independent supply chain for these essential inputs as fast as possible, reassuring private investors that they won’t be undercut by cheap PRC minerals in the future.

• Robotics—especially drones and their sensors, batteries, and other components. PRC manufacturers dominate commercial drone markets and increasingly industrial robotics. As the war in Ukraine has shown, these are dual-use technologies with obvious military applications. It is completely unacceptable to let China retain its chokepoints over this supply chain—but decoupling all at once is not viable, either.

• Medical devices and active pharmaceutical ingredients. COVID exposed dangerous dependencies for medical kit like masks and ventilators. China also serves as the dominant global supplier for key active pharmaceutical ingredients. The sooner the U.S. and its allies can decouple from China in medical products, the better.

• Legacy semiconductors. While attention focuses on cutting-edge chips, China is is already flooding the global market with older-generation semiconductors essential for automobiles and industrial equipment. This will become a crucial chokepoint unless allies start decoupling now.

Enforcement Against China’s Countermeasures

China will respond to avalanche decoupling by intensifying transshipment through third countries. Countries like Vietnam, Mexico, Malaysia, and others will face pressure to become conduits for disguised China’s exports.

The solution to this challenge is to partner with third countries to investigate transshipment patterns and publicize accurate supply chain data. One way to do this is to set up a new intergovernmental group, which we might call an Economic Security Cooperation Board (ESCB). The ESCB would provide technical assistance to third countries, helping them verify origin documentation and resist becoming unwitting participants in sanctions evasion. Over time, countries like Mexico and Vietnam could become ESCB partners. If they want preferential access to the U.S. and allied markets, to capture investment and jobs as supply chains pull out of China, they will need to honestly report what they’re buying and transshipping from China.

Establishing the ESCB wouldn’t require unanimous allied participation or enormous funding. It also wouldn’t have to come together right away. Even partial coordination—say, the United States, Japan, and Australia moving together to ensure their critical minerals were entirely clean of transshipped supply from China—Iwould demonstrate resolve while creating competitive advantages for participants. It would also show China that if decoupling has to be broadened or accelerated in the future, the allies have a framework for how oversight and enforcement would work.

Implementation Strategy

The administration should publicly threaten unilateral avalanche decoupling immediately. It should not condition avalanche decoupling on concessions from Beijing. Trump should not go to APEC prepared to trade avalanche decoupling away. The strong move isn’t to walk into the meeting with Xi having made threats Xi knows America won’t implement.

Simultaneously, Washington should convene immediate talks with the Anglosphere allies, Japan, and receptive EU members on sectoral coordination. The goal isn’t unanimous agreement but critical mass—enough participation to ensure effectiveness while demonstrating that decoupling isn’t just an American obsession. Again, we are only talking about a few key products that together represent less than 10% of total trade with China. If allies are uncertain, Washington can and should move ahead unilaterally to prove its resolve.

Meanwhile, ideally, Congress can get involved to back up the president’s position. It could write provisions for avalanche decoupling in critical minerals and defense-related components into the annual defense spending bill, the NDAA. The Senate and House have already passed respective versions, but it is not too late to add new amendments while the two versions are being reconciled.

The Window for Action

The time to trigger sectoral avalanche decoupling is now, not when some future crisis comes. There are three reasons why.

First, China’s egregious export controls provide political and diplomatic cover. Beijing cannot claim America is the aggressor while it proposes a new export control regime that would give it sweeping discretionary power to cut off U.S. and allied supplies of essential products.

Second, markets are already pricing in substantial U.S.–China trade friction. Shifting to a more predictable decoupling strategy would reduce market volatility rather than increase it, reassuring markets.

Third, if Trump is going to meet Xi at APEC, he needs to rebuild all the negotiating leverage possible. Right now, Xi thinks he is entering from a position of tremendous strength.

The White House should announce the framework this week, starting with the four priority sectors. Set the schedules, invite allied participation, and let predictability work its magic. The avalanche, once triggered, builds its own momentum. Beijing will protest, markets will adjust, and allies will see that America finally has a sustainable strategy for economic competition. Then—only then—will it be the right time for a summit.

Everyone knows Taiwan makes advanced semiconductors, but this is not the most important reason. This week, we’ll explore why.

Bottom line: the key U.S. national interests at stake in Taiwan relate to the shape of the regional and global economic order. Losing a conflict would be disastrous for these interests, but any US–China crisis would endanger them.

What does “free and open Indo-Pacific” actually mean?

The Indo-Pacific is big. It accounts for two-thirds of global GDP and 60% of maritime trade. It is the fastest-growing in both population and economic output. Geographically, it makes up over half the Earth’s surface.

U.S. Indo-Pacific Command, Area of Responsibility (Congressional Research Service)

In a region of islands and coastal states, most flows of goods and people travel on privately operated ships and aircraft. Interfering with these flows is relatively easy for big countries, because private operators don’t like going head-to-head against militaries.

Smaller, trade-dependent economies in the Indo-Pacific are acutely vulnerable to economic coercion. That’s why economic freedom must be a foundational principle of any regional order. In a free and open Indo-Pacific, goods and people can move freely through international waters and airspace without fear or favor. Every economy can set the terms of engagement with the global economy without coercion.

Sea lines of communication in the Indo Pacific (Marine Traffic)

The current order is maintained through a hodgepodge of institutions and norms. Multilateral institutions such as the World Trade Organization (WTO), International Monetary Fund (IMF), and World Bank were once at the heart of this system. Less so now. The G7, G20, and other more exclusive multilateral groupings play an increasingly role. But at its heart, the system is a set of norms and historical path dependencies implicitly backstopped by American power.

Why America cares

For all its flaws, the existing Indo-Pacific order provides enormous strategic benefits to the United States. These include:

• Incentives and institutions designed to prevent a sudden collapse of international trade, which would devastate U.S. prosperity.

• Structural guarantees that trading rules cannot be rewritten in ways that disadvantage the United States and its allies.

• A mechanism for preventing U.S. adversaries from bringing smaller countries—including in the Western Hemisphere—under their control through economic coercion.

• A mechanism for aligning interests between the United States and its allies and partners, signaling that it is safer to align with the United States than with U.S. adversaries.

• A legal framework for imposing costs on U.S. adversaries when they violate the system’s rules and norms.

These strategic and material benefits underpin U.S. economic prosperity at home and facilitate U.S. action to protect its sovereign rights and strategic interests.

China’s challenge to Indo-Pacific order

After the Soviet Union collapsed, the United States pursued a vision of globalization that involved integrating former adversaries into the system. Russia and then China were invited to accede to the WTO, on the assumptions that history had repudiated Communist economics, that integration would make these countries more responsible stakeholders, and that ultimately these societies would see political liberalization. In the process, the United States and its allies and partners became economically dependent on Russia, and even more so on China. We all know this history.

This strategic bet has failed with respect to Russia. It has not yet failed in China’s case, though some commentators may think otherwise. The United States has an interest in keeping China as at least a quasi-responsible stakeholder rather than a rogue state. This is why there is a prominent place for China in a free and open Indo-Pacific. But any PRC attempt to seize Taiwan by force would prove that the bet had failed entirely. It would demand a fundamental re-evaluation of the U.S. strategy.

This focus on rules is not mere rhetoric. It is essential to establishing the principles that all countries should be able to use international waters and airspace without fear or favor, and that powerful states cannot coerce weaker ones by denying them access to the commons or interfering with their ability to trade.

China’s strategy to achieve hegemony in the region exploits the fact that most nations in the region are small and rely on maritime trade for their lifeblood. If China can stop these countries from organizing to enforce these principles, and block the United States from intervening, it could wield economic coercion directly against the United States. It could threaten to limit exports of goods and services, or denying U.S. firms access to one of the world’s largest markets. The Indo-Pacific would effectively become China’s sphere of influence. Americans would suffer vastly diminished prosperity and economic security.

Moreover, whether the economic system in the Indo-Pacific can remain free and open is a question with global implications. After reshaping the region to suit its preferences, China would extend its influence subsequently into South Asia, the Middle East, and Africa, and potentially strike a grand bargain with a weak and divided European Union. Other adversaries like Russia, North Korea, and Iran would be empowered to challenge U.S. interests in multiple theaters. If Taiwan falls by force, the future of the global economic order would likely turn in China’s favor, as well.

Technological security and AI primacy

The AI revolution clearly has profound implications for global governance, the economy, society, and national security. In the coming years, AI could transform the services sector, which accounts for 80% of U.S. GDP, disrupting entire industries and affecting tens of millions of jobs. U.S. allies and partners will also face significant AI impacts, both beneficial and harmful. U.S. leadership will be critical in shaping global AI governance to address unsafe and unethical applications as the technology advances and more sectors of the economy adopt it. In the military sphere, AI has the potential to revolutionize operations and deterrence. It could threaten nuclear command-and-control systems, enhance target identification, and enable sophisticated cyberattacks, making AI leadership essential for homeland defense.

The CCP’s pursuit of AI dominance poses a unique threat. The CCP is a Leninist organization that seeks to maximize its power and survival. It rejects individual liberty, freedom of conscience, and freedom of expression as legitimate values. We should all fear a future in which the CCP monopolizes advanced AI and uses it for societal control.

The United States therefore cannot let the semiconductor fabrication plants, or fabs, that monopolize production of essential AI hardware fall under CCP control. If China managed to take control of Taiwan’s fabs and industrial know-how, it would not automatically seize the commanding heights of chip production, since Taiwan’s fabs need continued access to equipment and technology that the United States and its allies could restrict. Still, it would take a big step towards parity and eventually leadership in chip production—and if Beijing took the lead, it could coerce the United States and its allies by restricting the supply of advanced chips.

The U.S. must deter Beijing from sabotaging Taiwan’s fabs out of fear of falling badly behind in AI. This too would be an economic disaster for the United States. Navigating between these two risks is challenging. Either side could easily disable, damage, or destroy Taiwan’s fabs. Few conflict scenarios would see them survive intact.

Keeping Taiwan’s fabs operational and out of China’s hands requires sustaining the regional economic order. America seeks to deter China from creating a crisis that threatens that order. China, meanwhile, continues to look for ways to undermine the order.

In short: chips are important, but the chip war is really a proxy fight over the shape of regional order.

Survival and health of U.S. alliances

The United States has five treaty allies in the Indo-Pacific. China sees these alliances as a threat and is working assiduously to undermine them. While Taiwan is not a treaty ally itself, its geographic position at the nexus of this alliance network means that U.S. allies would be far harder to defend if Taiwan fell under China’s control.

If Taiwan fell to PRC aggression, U.S. treaty alliances in the region would probably not dissolve, but they would be hollowed out. Allies would still want the U.S. engaged in the region, but they would have more reason to doubt the political credibility of U.S. security guarantees. Japan, South Korea, and potentially several other countries in the region and beyond might seek to acquire their own nuclear weapons. They might also form their own alliance groupings or trade and technology pacts without the U.S. These outcomes would be strongly counter to U.S. interests and would multiply the challenges facing U.S. statecraft in the region and beyond.

Global geopolitical stability

While Washington foreign policy analysts are often mocked for their obsession with U.S. “credibility,” a U.S. humiliation over Taiwan could have disastrous, cascading consequences for global geopolitical stability. Taiwan is not a treaty ally, but U.S. treaty allies are already losing confidence that Washington would fulfill treaty commitments it extended decades ago. If Washington allowed Taiwan to fall, its adversaries would have new reasons to test the boundaries of American commitments globally.

China would almost certainly not move against Taiwan without having reached an understanding with Russia, North Korea, and Iran. These countries could coordinate their actions during and after a crisis, testing America’s ability to respond to multiple simultaneous crises globally. North Korea might exploit the opportunity generated by a failure of U.S. deterrence over Taiwan to aggress against South Korea. If the United States showed itself unwilling to fight for Taiwan, Russia would have reason to doubt that Washington would fight for its NATO allies in Eastern Europe—especially the Baltic states, which are largely indefensible by conventional means. Iran may exploit the chaos by ramping up aggression and attacks by its proxy forces on merchant shipping in the Red Sea, as well as U.S. allies and partners and on U.S. forces in Iraq, Syria, and Bahrain. If Washington failed to respond effectively to these crises, it would lose further credibility.

A failure of deterrence over Taiwan could open Pandora’s Box.

A free and democratic Taiwan

Taiwan's democracy represents a beacon of liberal governance amid rising authoritarianism. It is no accident that the United States’ most trusted and important allies in the region are democracies.

Allowing Beijing to extinguish Taiwan’s democracy would mark a symbolic and strategic defeat. Why? Because Taiwan also represents an alternative pathway for China. Taiwan’s very existence as a prosperous, innovative, stable, and orderly liberal democracy rebukes the CCP’s claims that the Chinese people are not ready for democracy and that the Communist revolution is inexorably bound towards victory.

The CCP’s hold on power looks solid for now, but this may not be true forever. It struggles badly with succession planning and has faced severe internal challenges during leadership transitions, most recently in 1989. Indeed, one reason to remain committed to the One China Policy is that the best possible way to resolve the dispute may be cross-Strait unification in the context of a free and democratic China. This prospect may seem far-fetched today, but we can only imagine how the PRC may change after Xi Jinping eventually exits the stage.

To be clear, the U.S. interest in Taiwan’s democracy is important, but not vital. The United States had interests in peace and security in the Taiwan Strait before Taiwan transitioned to democracy in the 1990s. These interests will abide even if Taiwan’s democracy falters. For now, however, Taiwan has become a litmus test of the U.S. commitment to supporting democracy under pressure.

Conclusion

Do the chips matter? Obviously.

If an important decision-maker asks “why do we care about Taiwan anyway?” is “it’s the chips, sir” a convenient answer? Obviously.

Would Taiwan stop mattering if the fabs were somehow destroyed? Absolutely not.

Taiwan matters fundamentally because it is the linchpin of regional order. American interests cannot tolerate China overturning that order by force. It is about the principle and the precedent.

Suggested further reading

A powerfully argued case for why Taiwan matters to America:

Andrew Erickson, Gabriel Collins, and Matt Pottinger, “Taiwan: The Stakes,” in The Boiling Moat: Urgent Steps to Defend Taiwan, (Stanford: Hoover Institution Press, 2024), especially 35–37.

The most articulate expression of what the Biden administration meant by “free and open Indo-Pacific.” Most Trump administration officials would disagree with this book’s heavy emphasis on international law and multilateral institutions, but they will still find much to like here. A book worth re-reading, even as the world changes.

Mira Rapp-Hooper and Rebecca Friedman Lissner, An Open World: How America Can Win the Contest for Twenty-First Century (New Haven: Yale University Press, 2021).

Of course, just because China has been patient in the past does not mean that its patience is infinite. Just because Beijing has dangled carrots in the past does not mean that it would not attempt an invasion if it thought one could succeed.

The decision is in the hands of a single man. This week, we parse his words.

Linked by “blood”

Since Xi took power in 2013, Beijing has increasingly emphasized the consanguinity of the Chinese and Taiwanese people. Xi speaks of “one family across both sides of the strait.” His favored term for the “Chinese nation” or “Chinese race” (zhonghua minzu 中华民族) includes historical and cultural elements but it is primarily racial in nature, rooted in an idea of common ancestry and “blood” (xue 血). As Xi explained to former Taiwanese President Ma Ying-jeou in Beijing in April 2024:

Both sides of the Taiwan Strait belong to the Chinese nation. The Chinese nation is one of the greatest nations in the world, having created the long-standing, brilliant, and unparalleled Chinese civilization, which sons and daughters of the nation feel proud of and honored for…The Chinese nation’s history of over 5,000 years has witnessed successive generations of ancestors move and settle down in Taiwan, their lives and procreation there, and saw the compatriots from both sides of the Strait fight side by side in the defense against foreign aggression and the recovery of Taiwan. Along the way, the Chinese nation has written the history that Taiwan and the mainland are inseparable and engraved the historical fact that people across the Strait are connected by blood.

Xi and Ma Ying-jeou in Beijing, April 2024 (Xinhua)

When Taiwanese politicians sometimes use the “one family” metaphor, they have typically liken Taiwan and the mainland to brother and sister, suggesting that neither is subordinate to the other. Xi means that all Chinese must be loyal to the government of China, the CCP, and the “core” leader. His use of the metaphor eerily echoes Vladimir Putin’s argument in his 2021 essay “On the Historical Unity of Russians and Ukrainians,” which argues that Russians and Ukranians are bound by “blood ties.” Rhetoric that treats Taiwanese civilians as compatriots suggests that Xi prefers to take Taiwan through “peaceful unification”—but as Vladimir Putin proved in Ukraine, this does not rule out a bloody war by accident or design.

Parsing U.S. intelligence estimates

In 2022, CIA Director William Burns revealed intelligence assessments which show that Xi has ordered the PLA to be ready to conduct an invasion of Taiwan by 2027. In his most detailed explanation, an interview on CBS News’ Face the Nation, Burns framed it this way:

We do know, as has been made public, that President Xi has instructed the PLA, the Chinese military leadership, to be ready by 2027 to invade Taiwan, but that doesn't mean that he's decided to invade in 2027 or any other year as well. I think our judgment at least is that President Xi and his military leadership have doubts today about whether they could accomplish that invasion. I think, as they've looked at Putin's experience in Ukraine, that's probably reinforced some of those doubts as well. So, all I would say is that I think the risks of, you know, a potential use of force probably grow the further into this decade you get and beyond it, into the following decade as well. So that's something obviously, that we watch very, very carefully.

Notably, according to Burns, the U.S. intelligence community believes that Xi has not committed to a date, nor has he made a decision to invade at all. Burns has carefully emphasized this point every time has been asked about the topic in public. Other U.S. officials appear to have seen the same intelligence, but their references to it have been less precise and seem to reflect personal views.

Why 2027?

2027, as the one-hundredth anniversary of the PLA’s founding, is a significant year for multiple reasons. At the 19th CCP Central Committee’s Fifth Plenary Session in October 2020, the party promulgated a “Centennial Military Building Goal” that focuses on four key areas of military modernization.

1. It seeks to accelerate the PLA’s integration of mechanization, “informatization,” and “intelligentization,” with a strong emphasis on AI in military applications.

2. It aims to modernize military doctrine, organization, personnel, and equipment, building on previous reforms under Xi Jinping.

3. It calls for improving efficiency and quality in resource allocation.

4. It calls for strengthening China’s national defense and economic power together through a program of military-civil fusion.

The 2027 building goal is far from secret; Xi has spoken about it in public on many occasions. It has no explicit link to Taiwan, even though the process of achieving the goal would inevitably make the PLA more lethal and effective in a Taiwan-related fight.

2027 is also a crucial date for Xi personally, as it will correspond to the 21st National Party Congress, where he is expected to win a fourth term as China’s paramount leader.

Notably, 2027 is still an intermediate goal in the PLA’s long-term strategy. The goal of establishing “basically complete national defense and military modernization” is not set until 2035. The goal of possessing a “world-class military” is not expected to be achieved until “mid-century.”

How “reunification” connects to “national rejuvenation”

Xi is also the first PRC leader to articulate a public deadline for achieving “reunification”: 2049, the hundredth anniversary of the founding of the PRC. Past CCP leaders have held that as long as a viable political and legal pathway towards future “reunification” can be kept open, future generations can figure out the details. As PRC President Yang Shangkun said in 1990: “It is possible that people of my age may not live to see the day when China is reunified. But it will not be good if the people here today fail to see China reunified. A popular saying in China goes: ‘A long night is fraught with dreams.’”

Xi expresses more confidence than his predecessors that a resolution is in sight. In San Francisco in December 2023, Xi told Biden that “reunification” would take place, but that the timing had not yet been decided. He also said in front of a group that he would prefer to take Taiwan peacefully. Xi has called “reunification” an “inevitable requirement for realizing the great rejuvenation of the Chinese nation” As he concluded in the Taiwan section of his 2022 Party Congress Work report: “The historical wheels of national reunification and national rejuvenation are rolling forward and will certainly be achieved.”

While Taiwan is a CCP core interest, it certainly seems to be just one of Xi’s many priorities. “National rejuvenation” is staggeringly ambitious program that encompasses nearly every aspect of human endeavor: the revitalization of the CCP, to the project of “building a moderately well-off society” and “socialist market economy” through world-leading industrial and technological capacity, the construction of “ecological civilization” to create “harmony between mankind and nature,” the creation of a flourishing and patriotic Chinese culture, and the construction of a “community of common destiny for mankind” to bring traditional “Chinese wisdom” into global governance, among many other goals. “Reunification” could either support or hinder this broader project, depending on how China pursues it.

This is why Xi has designed the 2049 deadline so that it can be fudged, if necessary. If a future Taiwanese administration is willing to sign a purely symbolic statement on the basis of the “1992 Consensus,” Beijing could potentially declare that “reunification” has been achieved while deferring “integration” to a later date. Given that Xi will likely no longer be in power by 2049, this timeline may have been deliberately constructed to provide strategic flexibility.

While Xi surely aspires to make “reunification” the capstone of his legacy, he can safely hand the Taiwan issue off unresolved to his successor sometime in the 2030s or even early 2040s. So long as Taiwan has not declared independence in the meantime, Xi’s successor can bear the blame if national rejuvenation is not achieved on schedule. Indeed, the fact that Xi has not pledged to personally achieve “reunification” suggests that his threats might be partly bluster. Xi’s most high-profile statements on the issue—his “Work Reports” at the National Party Congresses held every five years—call for “peaceful unification” and make no mention of deadlines.

The “defensive Xi” theory

Indeed, Xi’s argument in all his public statements is not that China must accelerate its “reunification” timeline, but rather that the U.S. must be deterred from using Taiwan to obstruct China’s national rejuvenation. A key addition to Xi’s 2022 Work Report was repeated references to “interference by external forces” (外部势力干涉) in Taiwan affairs, which he called “serious provocations” (严重挑衅). In 2023, he told European Commission President Ursula von der Leyen that Washington was trying to provoke him into attacking Taiwan.

While Xi’s depiction of U.S. “provocations” is exaggerated—both the Biden and Trump administrations have adhered to the One China Policy, and Taiwan’s leaders have respected China’s red lines—his statements invite two interpretations. He could be laying the groundwork for an unprovoked offensive against Taiwan, or he might genuinely view U.S. actions as aggressive, seeing himself as exercising restraint.

It is impossible to interpret Xi’s motivations definitively based on his actions, but there is at least a plausible case for the “defensive Xi” hypothesis.

Xi’s reaction to Nancy Pelosi’s August 2022 visit to Taiwan is one revealing example. The Biden administration initially privately asked Pelosi not to go ahead with the trip, but when the press reported on her plans, the administration did not publicly demand that she cancel. It was an extremely sensitive time in China’s political calendar, just two months before the all-important 20th Party Congress.

Xi personally asked Biden to stop Pelosi from going, but Biden told him there was nothing he could do. Did Xi believe him, or did he think Biden was speaking in bad faith and trying to undermine him? Either way, Xi had to show that he was in control. The PLA responded to Pelosi’s visit with coordinated exercises, firing missiles into sea on all sides of Taiwan and sending ships and planes across the median line in the Taiwan Strait for the first time. Notably, however, the PLA telegraphed the locations of the tests in advance and concluded the exercise at the promised time. It was a performance of strength but also a signal that Xi did not want escalation.

Conclusions

To conclude, the most plausible theory is that Xi has both defensive and offensive interests at stake in Taiwan. The top defensive goal is security in retirement, which is far from a sure thing as Xi enters his eighth decade. After all, one of Xi’s most significant acts in power has been to establish the precedent that retired officials can be humiliated, purged, and even prosecuted and expropriated.

Any move Xi makes on the Taiwan issue must be informed to some degree by fear of being the leader who lost Taiwan. For the same reason, Xi has an offensive reason to seize Taiwan if he can: it would be a legacy-defining achievement that would likely make him untouchable by rivals in his old age.

Suggested reading

Xi’s statements on Taiwan are highly consistent and meticulously scripted. No one I know reads them more carefully than Lyle Morris:

Lyle Morris, “Listen to Xi Jinping about Taiwan,” War on the Rocks, November 18, 2022.

We should be paying more attention to PRC discussions about political formats for “reunification.” They are a key indicator of regime readiness for a showdown:

Yiyao Alex Fan and Bonnie S. Glaser, “Interpreting Xi Jinping’s “‘Two Systems’ Taiwan Plan” (Washington, DC: German Marshall Fund of the United States, August 2024).

Xi’s thought on racial issues is disturbing and under-discussed, with wider implications beyond Taiwan:

James Leibold, “New Textbook Reveals Xi Jinping’s Doctrine of Han-Centric Nation-Building Publication,” Jamestown China Brief 24, no. 11 (May 24, 2024).

In the course of time, some of these assumptions may need to be updated. This will therefore be a living document. As circumstances force me to change my assumptions, I’ll note my updates in new pieces and update them here.

Some readers will surely have different views, and I welcome feedback.

Global geopolitical environment

The risk of great-power conflict seems higher than at any point in decades. NATO is helping Ukraine defend itself against Russia’s unprovoked war of aggression. The Middle East is a tinderbox, with Iran on the verge of acquiring nuclear weapons. China is menacing Taiwan and ramping up maritime aggression against the Philippines. North Korea continues to expand its nuclear arsenal and is developing advanced ballistic missiles. Facing this combination of threats, US military power is spread worryingly thin.

The four hostile authoritarian powers are increasingly operating as an axis. The regimes in China, Russia, North Korea, and Iran have different domestic conditions and foreign policy priorities, but they share a common interest in undermining US leadership and building a new world order safe for authoritarianism. They are sharing advanced defense technologies and selling each other large quantities of lower-end systems, in what amounts to the construction of an integrated defense industrial base (DIB). North Korean troops are fighting alongside Russians in Ukraine. As all four countries shift from dollar payment networks to Chinese cross-border payments systems, they are also building resilience to sanctions, which will make it harder for US policy to stop them from cooperating in the future. The integration trend will continue over the next decade.

The more the four adversaries deepen their cooperation, the greater the possibility that conflict in one region could spread to others. Deterrence is therefore linked across regions.

Why the China challenge ranks first

The deterrence challenge is greatest in the Indo-Pacific. Here, unlike in Europe, there is no NATO-equivalent organization to support US efforts to maintain peace and stability. Instead, the United States has a “hub-and-spoke” network of allies and partners that it formulated long before China emerged as a major military power. Whereas the adversary America faces in Europe is a declining power, the one it faces in the Indo-Pacific is still rising. Among many superlatives, drawing on the largest industrial base in human history, China already has the world’s largest active-duty military force, ground forces, navy, other maritime forces, and overall conventional ballistic and cruise missile forces—including a suite of military capabilities specifically designed to hold US forces at risk.

The best way to deter Russia, North Korea, and Iran is to keep deterring China. Russia is unlikely to attack NATO without PRC support. Same with North Korea attacking South Korea. Pyongyang today is mainly focused on menacing its democratic neighbors and deterring Washington and Seoul from seeking regime change. South Korean and US forces could defeat a conventional North Korean invasion, despite the significant damage it would cause. Furthermore, Pyongyang understands that if it uses weapons of mass destruction against a US ally, it should expect devastating retaliation. Finally, deterring China is essential to slow Iran’s efforts to reconstitute its nuclear and missile programs.

The most dangerous and likely US-China flashpoint is Taiwan. Many Taiwan crisis scenarios can be imagined. They range from a formal blockade with warships to a quarantine with coast guard ships, to a smaller attack on the outlying islands of Kinmen and Matsu, to a full-scale invasion and war with the United States. China may pursue any of these strategies in combination or in sequence. Escalation to nuclear use cannot be ruled out. The United States must prepare for all contingencies.

China is currently deterred from attempting to revise the status quo by force—largely because it fears losing a conventional war against US forces. Based on our reading of the open-source evidence, I assess that Washington and Beijing currently share this assessment—but that China is narrowing the gap, and that as the gap narrows, the risks that China may miscalculate will grow.

Keeping China deterred over Taiwan must be the United States’ top strategic priority. Taiwan is an “unsinkable aircraft carrier” for projecting military power in the maritime space around Japan, the Philippines, the South China Sea, and the broader Western Pacific. If Taiwan were to fall, the US’s ability to defend regional allies such as Japan and the Philippines from future attacks would be severely compromised, degrading the credibility of US security assurances. Smaller countries in the region, especially in Southeast Asia, would likely submit to Beijing’s de facto regional hegemony.

A conflict over Taiwan would almost certainly lead to a devastating setback for the US tech sector. Either it would lead to the destruction or disabling of Taiwan's semiconductor industry, setting back the entire global economy by several years, or China would seize Taiwan’s chipmaking facilities (“fabs”) intact, which could then allow it to starve the United States and its allies of computation power and seize the commanding heights of AI. A conflict over Taiwan would also recast economic and trade relationships in the region and beyond. Both outcomes would make it far harder to ensure prosperity for future generations of Americans. They emphasize the importance of deterring the conflict from breaking out in the first place.

How to deter China

To maintain military deterrence over China for the next decade and beyond, the US military must make Beijing believe that an invasion of Taiwan or a US treaty ally would be likely to fail, and that non-invasion attacks on a US treaty ally would not be worth it, either. In the Taiwan invasion scenario, there would likely be a clear division of labor between Taiwan and its external defenders. Taiwan would take primary responsibility for defeating an amphibious and aerial assault and denying the PLA a lodgment on its main island. Meanwhile, the United States and other allies would engage China’s surface combatants, submarines, and airpower operating around Taiwan, including by undermining their critical supporting systems. There are infinite variations.

In short: The surest way to persuade Xi Jinping that the costs and risks of provoking such a war would exceed any possible benefit is to show him that China’s air-naval power within the First Island Chain (FIC) would likely be destroyed during an all-out conflict.

Although China is the pacing threat, the US military must also remain agile enough to address threats worldwide. Russia is doubling down in Ukraine. Even in the Middle East, which I assume is a third- or fourth-priority theater, day-to-day operational demands can force hard trade-offs in resource allocation and readiness. Mindful of the increasingly dangerous global context, the United States must ensure that it has sufficient capacity—the scale and endurance to sustain large-scale operations over time, deploy sufficient forces across multiple theaters, and maintain readiness for multiple simultaneous conflicts.

Taiwan must do more to strengthen its own defenses and resilience, but unlike Ukraine it cannot prevail in a conflict unless the United States is organized, equipped, and politically resolved to defeat a PLA move. Demonstrating the capability to defeat the PLA will have a number of strategic benefits. It will give Taiwan’s vulnerable democracy the confidence to resist China’s gray zone tactics and give the Philippines the confidence to stand up to Beijing’s maritime aggression in the South China Sea. Moreover, a credible conventional deterrent would complement existing extended nuclear deterrence arrangements and reduce pressure on regional allies such as South Korea and Japan to develop independent nuclear capabilities. If for whatever reason Taiwan falls under PRC control in the future, it will be all the more important for the United States and its allies to have a dominant conventional force that can deter further PRC aggression.

Finally, while robust conventional military deterrence is necessary, it is not sufficient by itself. The US and China are economically interdependent nuclear-armed states in a highly globalized world. Of the nearly 200 countries on earth, the vast majority would want to stay neutral in any conflict, and all would have a stake in the outcome for strategic, political, and economic reasons. Deterring China therefore requires an integrated strategy with political, military, strategic, and economic dimensions that support rather than undermine one another.

Economic assumptions

The Trump administration’s trade negotiations have made the future of the U.S.–China economic relationship more unpredictable. But a few themes are highly predictable:

• Another peacetime attempt at rapid, broad-based decoupling is now exceedingly unlikely. The attempt at rapid decoupling on April 9, 2025 (“Liberation Day”) failed. When tariff rates were abruptly raised above 100%, markets entered free-fall. Days later, the administration paused the tariffs.

• The United States doesn’t want to bear political pain to achieve peacetime decoupling. Its pain tolerance in crisis or wartime is surely significantly higher. But no one knows how much higher.

• “Decoupling” now means partial decoupling, focused on a narrow set of high-technology products. In other words, it means basically what “de-risking” meant during the Biden administration.

• China knows this.

The global effects of the Trump tariffs are also unclear, but I work off the following assumptions:

• Key U.S. alliances in Asia and Europe have been strained politically by the tariffs, but are not broken.

• The WTO and “rules-based” international trading system are now largely irrelevant for trade disputes between great powers. But they still have normative force. That matters, in practice more for smaller countries than for larger ones.

On China’s economy, I make the following assessments:

• The official economic data are not accurate. They should be read as propaganda tools for influencing markets and public narratives.

• China’s economy is unhealthy but stable—not in crisis or imminent danger of collapse.

• Deflation is now entrenched.

• Consumption is weak but not disastrously slow.

• Local government finances are in dismal shape, but central government finances are healthy, which is what matters for strategic competition.

• Regulatory tools, capital controls, and FX reserves are robust enough to prevent any peacetime banking or financial crisis.

• Policy statements about “rebalancing consumption” will not be meaningfully carried out. China’s overcapacity problem will get worse

Technology and the character of warfare

U.S.-China technology competition matters for the military, economic, and political fronts of strategic competition.

I assume the pace of innovation in relevant technologies will basically follow recent trends. This assumption is open to debate, particularly in the case of AI, where many smart analysts see exponential improvement. However, exponential and linear curves look pretty similar over the short term.

Competition in AI will shape U.S. and Chinese industrial competitiveness and provide the basis for new kinds of strategic partnerships with other countries. But the most direct application of technology for strategic advantage is in the military.

Warfare is in the midst of a technological transformation. In some respects, the images from the trenches in eastern Ukraine recall the horrors of World War I. But in other respects, this war is like no other in history. As a result of drones, satellite communications, precision munitions, and other new capabilities, targets that can be spotted by the enemy are often destroyed within minutes, even many kilometers behind the front line.

Militaries are competing to adapt to this new situation. The Russian and Ukrainian armed forces have adopted new models for logistics and resupply and changed the way units maneuver. They have repurposed existing capabilities for spotting and strike and invested in countermeasures such as air defenses, decoys, and electronic warfare (EW). The battlefield in Ukraine has become a sandbox of innovation. We don’t know exactly what lessons Xi Jinping and the PLA are learning from Ukraine—but a similar adaptation race is underway in the Indo-Pacific, too. China’s focus on adaptation and modernization suggests they think the speed of technological change is rapid and possibly accelerating. The United States will therefore have to both modernize its force and find innovative ways to integrate new technologies with existing platforms.

The US military can’t view emerging capabilities merely as replacements for legacy systems. Rather, it must leverage new technologies to enhance the effectiveness of proven platforms, creating additional margins of advantage through their combination. It must demonstrate not only technological superiority in specific capabilities, but also the capacity to keep adapting its armed forces and defense industrial base (DIB) to be able to prevail in a protracted, high-intensity conflict.

To achieve these objectives, Washington needs to break from the status quo and start taking China deterrence more seriously. Over the past two decades, China has conducted the largest military buildup since World War II. It is systematically developing a force capable of disrupting US operations in the region, backed by a vast DIB. Although the US Department of Defense (DOD) has made progress in responding, it is moving too slowly. Over the next decade, the DOD will need more resources, better coordination with industry in the United States and allied countries, and pressure from Congress to use its resources wisely and enact necessary reforms. Preserving deterrence will require more money, but it is not just a question of money. It is, more fundamentally, a matter of political will. The world’s major democracies must work more closely together to deter a great-power war, and this collaboration will require American leadership. It will not happen organically.

Trends in spending and the military balance

Left unchecked, China may seize the relative advantage in the military balance within the next five years. At that point, it might promptly launch a direct military attack on US interests in the region. Alternatively, it could display its superiority and threaten war to coerce the United States or its allies, while pressing to increase its margin of advantage. As US Indo-Pacific Command Commander Admiral Samuel Paparo put it in February 2025: “We operate on increasingly thin margins for error.”

China’s military spending will continue to grow faster than that of the United States, even as China’s overall economic growth continues to slow. Following the Congressional Budget Office, I expect the US baseline defense budget to grow by around 2 percent per year in real terms through 2040 (to roughly $1.4 trillion annually)—assuming the United States is not pulled into a great-power war before then. However, these incremental funding increases will go largely toward personnel salaries and maintenance costs and to be insufficient to support many major new capital expenditures.

Congress and the DOD face hard choices ahead. Some existing programs may have to be downsized or eliminated to free up funds for more urgent priorities. Higher spending will have a nonlinear impact on readiness, but with a lag of several years, and only if the money is allocated to high-impact programs. Substantial special appropriations to enhance deterrence are likely, potentially totaling hundreds of billions of dollars over the next decade—but the precise timing, size, and content of these packages will likely be hard to predict in advance, which will make it harder for the DOD and key contractors to plan effectively.

DOD Budget, Historical and Projected, October 2023 (Congressional Budget Office)

Source: Congressional Budget Office, Long-Term Implications of the 2024 Future Years Defense Program, October 2023. The base budget does not include special appropriations, which is how Congress often chooses to fund ongoing US military operations in specific countries.

Incremental reform is much more likely than wholesale reform. We should focus on identifying key gaps in the current force structure that can be addressed at relatively low cost through incremental, bipartisan reforms.

It’s good that high-level U.S.–China relations are stabilizing. But using Lai’s visit as a bargaining chip is a mistake that undermines deterrence.

The U.S. strategy to deter China from aggressing against Taiwan rests on four pillars: political, conventional military, strategic, and economic. This week, we’ll explore how the four pillars support one another.

The bottom line: Robust military deterrence is necessary—but it’s no longer sufficient to deter aggression by itself.

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1. Political deterrence

Deterrence is not just about what you can do. It’s about what you probably would do in a hypothetical scenario. The theory of deterrence calls these signals “credible resolve” and “credible restraint.” If Xi Jinping miscalculates about U.S. resolve to defend Taiwan from aggression, deterrence could fail even if U.S. military is far more powerful than China’s. Or, if Xi misperceives a U.S. plot to use “Taiwan independence” to undermine his hold on power, he may act out of desperation. Deterrence failed in 1941, even though Japan had one-fifth the GDP, an enormous ongoing war in China, and many other structural disadvantages. Pearl Harbor happened anyway.

Clear and credible political signaling is therefore first pillar of deterrence in the Taiwan Strait.

Today, with so much uncertainty about the Trump administration’s plans and priorities, deepening U.S. engagement with Taiwan is more important than ever. Washington and Taipei are in a live trade dispute at the moment, with Taiwan now facing tariffs of 32%. Surveys show Taiwan’s trust in the United States falling sharply as the trade war pushes Taiwan deeper into domestic political dysfunction.

U.S. concerns about Taiwan’s currency manipulation are legitimate. But is this a more important concern than pressing Taiwan to improve its resilience? Washington should be showing Beijing and Taipei that it wants a closer trade, technology, and energy relationship with Taiwan, not just a smaller current account deficit. Washington can also do more to support Taiwan’s democracy, which Beijing is assiduously trying to undermine.

At the same time, United States must also continue to make clear that it opposes unilateral changes to the status quo in the Taiwan Strait. In accordance with its longstanding One China Policy, it must refrain from treating Taiwan as a formal treaty ally. It must never pressure Taiwan to engage in cross-Strait negotiations. It must resist Beijing’s attempts to move the goalposts by limiting longstanding forms of U.S.-Taiwan engagement—like transits by Taiwanese presidents. Washington should also retain its de facto policy of “strategic ambiguity” about the precise nature of its defense commitments to Taiwan.

While U.S. policy should not change, Washington should consider changing the way it communicates its ambiguous position, using a new concept that I call “structured ambiguity” to remind Beijing of some obvious facts.

The basis of the One China Policy is the Three Joint Communiqués signed by Washington and Beijing in the 1970s and 80s. Any PRC military action against Taiwan would flagrantly violate Beijing’s commitments. Thus, if the U.S. intelligence community concludes that Beijing intends to unilaterally alter the status quo, the U.S. President will inevitably need to re-evaluate the One China Policy at a fundamental level. This may include reinterpreting the policy in a limited and proportionate way to protect U.S. national interests while signaling a commitment to peace and stability. It may also include recalibrating longstanding limits on the U.S.–Taiwan political and military relationship.

In short, Xi Jinping must be warned that indefinite gray zone aggression against Taiwan will carry significant risks. If he provokes a brinkmanship crisis, Washington should make clear that it may act decisively to defend its interests before American lives are lost.

Structured ambiguity is a subtle position that will need to be communicated carefully. The United States is not seeking an excuse to abandon the One China Policy. It is seeking to deter Xi from fomenting gratuitous crises. Structured ambiguity will not deter full-scale invasion or blockade. But it might help provide crucial advance warning if Xi does decide to move against Taiwan, potentially offering Washington and Taipei vital days or weeks to prepare.

Finally, political deterrence involves showing solidarity with allies whose support would be essential in a crisis.

Washington should seek to align this political deterrence strategy with its core allies, particularly Japan, Australia, the UK, and Canada. It should institutionalize this coalition and move towards joint contingency planning and strategic communication. It should prepare a playbook to respond to China’s lawfare and push back in the UN and the court of international public opinion. It should appeal to neutral countries’ self-interests—but not preach or demand that other countries adopt the U.S. political position.

All of this gets harder if the U.S. suggests that the terms of its relationship with Taiwan are up for negotiation.

2. “Deterrence by denial”

The second pillar is conventional military “deterrence by denial.” China has various military options for moving against Taiwan, including bombardment, amphibious invasion, and blockade. The United States and its partners must maintain the ability to defeat them.

Attempting an invasion would be a massively complex and large-scale joint operation—a high-risk affair for a military without deep combat experience. The weakest links in the PLA’s invasion force are its logistics chain and amphibious ships. My colleagues Andrew Erickson, Conor Kennedy, and Ryan Martinson of the Naval War College’s China Maritime Studies Institute break this down clearly in their groundbreaking recent volume. There are relatively low-cost ways in which the United States and Taiwan can increase the risk and complication for PLA planning.

Because China enjoys quantitative advantages in key aspects of the military balance, including aircraft, surface ships, and missiles, maintaining conventional military deterrence is partly an exercise in psychological warfare against Xi himself. Xi must be made to ponder plausible reasons why his military would be unlikely to win if he chose to escalate or prolong a conflict. Maximizing U.S. technological superiority and maintaining a baseline level of allied defense industrial capacity will be essential to this effort, particularly over the longer term.

Deterrence by denial must also extend to the blockade scenario. It is probably not the best opening move for Xi to start a conflict with a blockade, but Xi may disagree. Any invasion of Taiwan would almost certainly involve an effort to stop Taiwan’s supporters from resupplying it with munitions, energy, food, and other essentials. Blockade remains a fallback option if an invasion fails. Persuading Xi that a protracted blockade would not be “checkmate” is the hardest part of conventional military deterrence.

If there is no credible allied plan to resupply Taiwan, and China imposes a blockade at any stage, Taiwan’s leaders might calculate that eventual defeat is certain, and thus capitulate quickly. Breaking a blockade by force could well require striking selected key targets inside mainland China and mining of China’s harbors, among other escalatory steps. Whether this would be advisable is a political decision for the U.S. president. Still, the U.S. president should ideally have an option to operationally defeat both a simultaneous invasion and blockade without nuclear escalation. This—not Taiwan’s currency manipulation—is what policymakers should be focusing on.

3. Strategic (not just nuclear) deterrence

The third pillar of deterrence is strategic. China is engaged in the fastest nuclear build-up since the early Cold War. China’s strategic deterrence doctrine is deliberately fuzzy, but it is clear that China sees strategic deterrence as extending beyond the nuclear domain to potentially include space, cyber, and economic threats. To maintain strategic stability, the United States must maintain a robust, cross-domain strategic deterrence system.

The U.S. president needs flexible options that signal both credible resolve and credible restraint—across the range of plausible peacetime, crisis, and conflict scenarios. Practically speaking, this means the United States should keep modernizing its nuclear forces and delivery systems, including by re-establishing the capability to build new warheads quickly if adversaries’ actions require it. The United States must remain strongly opposed to nuclear proliferation, but it may consider NATO-style “nuclear sharing” to bring South Korea and Japan closer to nuclear deterrence operations—if these two countries continue to request it for reassurance purposes.

Strategic deterrence extends across domains is no longer just about nuclear weapons. The United States must also act decisively to maximize its advantages in outer space. It should accelerate the transition to resilient satellite constellation architectures for command-and-control, communications, computers, intelligence, surveillance, and reconnaissance (C4ISR) and build and covertly display capabilities to hold China and Russia’s C4ISR at risk. Maintaining U.S. advantages in key AI capabilities and signaling them effectively to China could also strengthen strategic deterrence. We will talk about these issues in detail in future weeks.

The United States can make various economic threats that may or may not count as strategic deterrence. This might include tariffs, sanctions, attacks on the PRC financial system, and interdiction of trade. These threats are already on the table. We’ll talk about financial war (金融战争) scenarios in future weeks.

But economic mutually assured destruction is not interchangeable with nuclear MAD. It likely has a much weaker deterrent effect. A city can be vaporized, and once vaporized it can’t be un-vaporized. Neither principle holds true for an economy. Even the most extreme economic punishments can be lifted once they start to hurt, and economies can adapt around them. Threatening EMAD—let alone attempting it—also risks undercutting the political pillar of deterrence.

4. Economic contingency planning

The fourth pillar of deterrence is an affirmative economic contingency plan for a crisis. If supply chains in and out of China and Taiwan are disrupted even temporarily, the impact on global financial and macroeconomic stability would be enormous.

As the bipartisan House Select Committee on the Chinese Communist Party concluded bluntly in December 2023, “The United States lacks a contingency plan for the economic and financial impacts of conflict with the PRC.” Even if Washington had the power to stop other countries from trading with China—a dubious assumption—rapid economic decoupling would not be politically realistic or strategically productive.

The best way to communicate resolve in a crisis—and in the gray zone—is to communicate consistently and in advance how the United States would act to defend its own economic interests. Effective economic contingency planning must punish China only as a welcome byproduct of policies that advance other U.S. interests, which are shared by allied countries and neutrals alike. It is near-certain that China would keep trading with many U.S. trading partners during and after a potential Taiwan crisis. Contingency plans need to take this fact into account.

Reducing vulnerability to economic coercion also strengthen deterrence. America should focus on breaking critical dependencies first and addressing non-critical dependencies over time as part of a wider program of economic leadership. In a Taiwan crisis scenario, dramatic changes to the structure of the global economy would become possible, but they would be sustainable in the long term only if they minimized the economic pain on the United States and protecting the vital interests of key partner countries.

Integrating the pillars

Why can’t these four pillars of deterrence stand individually? Why do they have to be integrated?

Because a conflict with China over Taiwan could become protracted, and U.S.–China relations might never recover. This is why Taiwan’s will to fight is also a critical, yet often misunderstood, component of deterrence. While pre-war public opinion polls in Ukraine suggested only mixed willingness to resist Russian aggression, the full-scale invasion transformed Ukrainian society into a determined and cohesive fighting force. Taiwan’s future resilience may similarly depend on its leadership’s ability to inspire national defense, ensuring that any attempted invasion by China would be met with fierce resistance rather than rapid capitulation. While current U.S. war planning focuses on defeating a Chinese amphibious invasion within weeks or months, this narrow focus creates dangerous blind spots.

It is absolutely essential to disabuse Xi of the misapprehension that China could win simply by escalating a conflict until America loses resolve, or by dragging out the conflict until the U.S.-led coalition cracked. The United States must credibly show that its political and economic plan is robust: that Washington could harness the initial global reaction to the outset of a crisis, build a durable coalition, and structure the conflict on favorable terms for a potential long-term struggle.

Seen in this light, economic and political deterrence are not just supplementary measures but essential and interconnected pillars of integrated deterrence. In the heat of a crisis, the U.S. ability to deter a catastrophic war and secure an honorable peace will largely come down to whether Xi believes that U.S. threats are credible.

If Washington wants to deter conflict with China, it should not let Taiwan become a bargaining chip. Rather, it should hold the line and accelerate preparations for a crisis.

Suggested further reading:

On credibility and political deterrence:

Thomas J. Christensen, M. Taylor Fravel, Bonnie S. Glaser, Andrew J. Nathan, and Jessica Chen Weiss, “How to Avoid a War Over Taiwan, ” Foreign Affairs, October 13, 2022, https://www.foreignaffairs.com/china/how-avoid-war-over-taiwan

On the PLA’s uneven preparedness for a Taiwan invasion:

Andrew S. Erickson, Conor M. Kennedy, and Ryan D. Martinson, eds., Study No. 8, Chinese Amphibious Warfare: Prospects for a Cross-Strait Invasion (Newport, RI: China Maritime Studies Institute, 2024), https://www.andrewerickson.com/wp-content/uploads/2024/11/Chinese-Amphibious-Warfare _ Prospects-f or-a-Cross-Strait-Invasion.pdf

On the need to prepare for protracted war:

Iskander Rehman, Planning for Protraction: A Historically Informed Approach to Great-Power War and Sino-US Competition (Abingdon: Routledge, 2023). See here.

“Follow the Party!,” the troops shouted back. “Fight to win!”

Yet beneath Xi’s swagger lies uncertainty. “We need to build a strong people’s military more than any other time in history,” he added, betraying lingering doubts about the PLA’s readiness to meet his ambitious goals.

Our goal this week: understand Xi’s strategy, and what it means for U.S. deterrence.

Xi at Zhurihe, July 2017

Xi’s emphasis on military modernization is part of a broader vision for China’s “national rejuvenation,” a term he uses to encapsulate the CCP’s domestic and global ambitions. By 2049, the centennial of the People’s Republic of China, Xi aims to:

• Solidify CCP control

• Transform China into the dominant power in the Indo-Pacific

• Restructure the global economy to serve CCP interests.

• Dominate the development, manufacturing and deployment of emerging technologies—including AI, which must “adhere to the core values of socialism.”

Taiwan is the most dangerous potential flashpoint, but Xi’s project could also lead to crises in the South China Sea, Korean peninsula, and elsewhere.

Taiwan is a hot zone because it occupies a unique position in Xi’s grand strategy. Taiwan is a litmus test for U.S. resolve. It is a production hub for the world’s most important technological hardware, and a gateway to regional and ultimately global dominance. As Xi describes it, “reunification” with Taiwan is not only essential to national rejuvenation, but it is “inevitable.”

Xi’s desired endgame is “peaceful reunification” (和平统一). By “peaceful,” Xi means a largely bloodless but coerced settlement in which Taiwan submits fully to CCP rule under a fig leaf called “One Country, Two Systems.” In the meantime, he is likely to keep escalating pressure in the “gray zone”—a space between peace and war that includes tactics like economic coercion, cyberattacks, disinformation, and military intimidation.

Gray zone operations allow Beijing to erode Taiwan’s resolve and redefine the status quo without triggering a conventional military response. They are ongoing and could step up dramatically at any time. Note: some analysts disagree that gray zone pressure is Xi’s “Plan A.” The most famous argument for this is Elbridge Colby’s Strategy of Denial. In future weeks, we’ll go deep into crisis scenarios short of war that would test U.S. and Taiwanese resolve.

Xi’s first option for major escalation in the gray zone is a “quarantine”: a PRC move to seize control of Taiwan’s international trade under the guise of legitimate customs enforcement. A quarantine by my definition would not involve cutting off shipments of food, fuel, and other essential civilian goods that comply with PRC law. It would push the burden of disrupting trade flows onto the United States. It would try to make Washington own the economic crisis that inevitably followed.

His second option a coercive mobilization of PLA air-naval forces for a potential invasion. This would effectively dare other countries to evacuate their citizens from Taiwan and give Xi the option to strike if Taiwan and the United States showed signs of weakness.

Meanwhile, Xi is preparing a more bellicose backup plan: a fully-developed military option for a “joint blockade operation” to starve Taiwan out during an outright war, possibly culminating in an amphibious invasion. He is systematically building a defense industrial base, strategic stockpile system, financial system, and domestic police state capable of waging war with the United States. In recent years, he has used dark language that strongly hints to his CCP compatriots to be ready for such a scenario.

The United States does not seek conflict over Taiwan. Its longstanding One China Policy, guided by the Three Joint Communiqués, the Six Assurances, and the Taiwan Relations Act, opposes Taiwan’s independence while maintaining an abiding interest in peace and stability in the Taiwan Strait. The United States supports the resolution of cross-Strait differences peacefully and without pressure and intimidation, with any outcome acceptable to the people of Taiwan. More broadly, Washington and its allies believe that the Indo-Pacific region must remain free and open.

There is a place for a powerful and prosperous China in this U.S. and allied vision of regional order—so long as China abides by international law and refrains from coercing its neighbors with threats of violence. It’s important to keep hammering this message.

However, aspects of Xi’s strategy are fundamentally incompatible with vital U.S. interests. These include his efforts to undermine the security of U.S. allies, seize the lead in key AI applications that could threaten strategic stability, and reshape the international economic order to serve China’s interest at the expense of the United States.

Taiwan’s role as a leading semiconductor producer, producing 99% of the most advanced AI chips, raises the economic and strategic stakes. But it is not fundamentally about chips.

The most profound concern is the precedent that would be set if China is allowed to dictate how Taiwan engages with the global economy. A forced takeover of Taiwan—whether by blockade, quarantine, or invasion—would damage or destroy the international economic system, undermine key U.S. alliances, and risk instability and challenges including but not limited to nuclear proliferation. A failure to defend Taiwan would signal a U.S. retreat. It would embolden China to resolve future disputes with U.S. regional allies through extreme economic coercion, backed by an implicit threat of military force.

The stakes extend far beyond Taiwan itself. If Xi subjugates Taiwan while the United States falters, China will be on a clear path to achieving its broader global ambitions by 2049. If Xi moves against Taiwan in any way, and fails, the result could be a prolonged conflict that threatens his grip on power but also risks vital U.S. interests. Either way, the consequences will reverberate globally. Simply abandoning Taiwan isn’t an option because there is no way to escape catastrophic consequences should it fall.

Despite his aggressive posturing, Xi has likely not made up his mind to risk everything in a full-scale war with the United States. Notably, during his twelve years in power, Xi has avoided fomenting any crisis that could seriously risk such a war. This suggests that—for now—he views the potential costs as prohibitively high. According to former CIA Director Bill Burns, Xi has instructed the PLA to develop the capability to seize Taiwan by 2027. This is an alarming assessment, but it also confirms that Xi thinks the PLA isn’t yet ready for a full-scale invasion.

There is no credible evidence in open sources that Xi has made a decision about whether or when to move. He has twice said that the Taiwan issue “cannot be handed down to the next generation,” implying that he would like to achieve “reunification” in his lifetime. However, Xi will be 96 years old in 2049, and presumably no longer in power. The 2049 deadline can probably be fudged if the CCP fails to meet it.

Moreover, if Xi can build robust invasion and blockade capabilities, he doesn’t have to implement them to get coercive value out of them. If America concludes that it would surely lose any war with China, it will back down when Xi forces the crisis. Xi can then complete his “rejuvenation” project unobstructed.

It therefore isn’t too late to shore up deterrence—but the United States must still brace for Xi to force a crisis. China undeniably has an advantage in momentum. Over the next several years, China is likely to gain ground in key areas of the military balance relative to the combined forces of Taiwan, the United States, and their other potential partners, which include Japan, Australia, and the UK. This will make Xi more risk-tolerant.

The window of greatest risk may well be between between the 21st Party Congress in autumn 2027, where Xi will secure his fourth term and lock in party approval for his agenda, and the inauguration of the next U.S. president in January 2029.

On current trends, the United States and China are barrelling towards a major brinkmanship event, if not an outright war. Washington should seek to deter both a crisis and a war. But it must also prepare for both.