“Adults in a Room” is a series in collaboration with The Stimson Center’s Reimagining US Grand Strategy program. The series stems from the group’s monthly networking events that call on analysts to gather virtually and hash out a salient topic. It aims to give you a peek into their Zoom room and a deep understanding of the issue at hand in less than the time it takes to sip your morning coffee without the jargon, acronyms, and stuffiness that often come with expertise.
While nuclear weapons understandably draw the most attention, non-nuclear strategic deterrence, especially in the economic and conventional domains, remains central to US foreign policy. US policymakers have increasingly focused on using economic measures to deter or hinder a potential Chinese assault on Taiwan. Meanwhile, amid growing concerns in South Korea about the credibility of US extended nuclear deterrence, Seoul has invested heavily in its independent conventional deterrent.
October’s Reimagining US Grand Strategy roundtable brought members of the foreign policy community together to discuss non-nuclear strategic deterrence measures. The conversation focused on a Taiwan contingency as a case study in economic deterrence and the Korean Peninsula as a case study in conventional deterrence. The group discussed and debated topics including the likelihood that other countries will refuse to follow US sanctions against China, possible unintended consequences of economic and conventional deterrence tools, and the potentially destabilizing effects of South Korea’s “3K” conventional deterrent.
Five experts weigh in on the issue below.
Shreya Lad, Research Assistant, Cyber Program, Stimson Center
A key challenge to the effectiveness of “economic deterrence” against adversaries like China and Russia lies in the contradiction between US and allied perceptions on trade restrictions. Key US allies in Europe not only have a greater relative dependence on Chinese markets but might be further removed from the security implications of its military advancement and rise.
European strategies classify China as a “systemic rival, economic partner, and competitor” all at the same time. China is the second-largest recipient of licensed transfers of dual-use technology from the European Union (EU). China values this interdependence as many European companies do, in part because it has implications for China’s force posture. At the same time, this strategic trade relationship creates a unique pressure point for Europe, leaving it open to Chinese coercion.
Secondly, Europe sees US influence to inhibit EU-China trade as a question of protectionism, competitiveness, and industrial superiority. Germany and France believe the underlying objective of US efforts to control China’s tech innovation was to ensure American tech competitiveness and prevent China’s economic growth to secure US dominance.
This is by no means new. During the Cold War, France and the United Kingdom bargained against the United States even as they faced a common adversary in the Soviet Union. For instance, former US President Ronald Reagan’s Strategic Defense Initiative (SDI) proposed to establish a layer of strategic defenses was unpopular in Europe primarily because of its implications for the French nuclear deterrent, but also because it was suspected to lead to a brain drain of European scientists and technologists to the USa. Likewise, defense technology arrangements were thought to create a dependency on the US, widening existing technical and commercial gaps between European and American industry.
The US has played a key role in influencing its transatlantic allies on economic statecraft in the past. It urged Germany to restrict Huawei’s 5G equipment, and the 2016 decision to prevent a takeover of Aixtron’s US subsidiary by a Chinese semiconductor company, despite approval by Germany. In the latter case, the Obama administration flagged security concerns around Aixtron’s applications in advanced radar equipment of Patriot missile defense systems to convince German authorities to withdraw their approval of the acquisition.
Any restrictive measures that the United States expects Europe to replicate should follow from credible criteria and relate to consistent “red lines,” such as China’s support to Russia in the Ukraine war, or technologies with applications in destabilizing weapons systems or platforms.
Secondly, there has to be a clearly established link between critical trade with Europe and China’s support to Russia’s war machine in Ukraine. In 2023, up to 90% of Russia’s microelectronics imports were reported as coming from China, including military optics for tanks and armored vehicles. Seventy percent of Russia’s imports of machine tools from China were estimated to be destined for producing ballistic missiles.
Russian customs data for 2022 show that the bulk of these exports were not products made in China: they were produced in third countries for US and EU companies. China thus became the most important platform for Russian imports of Western dual-use goods. This calls to mind the Soviet Union’s purchase of the Rolls-Royce Nene turbojet engines from the United Kingdom in 1946-47, on the condition they would not be used for military purposes. The sale allowed the Soviets to engineer the MiG-15 fighter jet, which was deployed in the Korean War against the United States.
An approach that is blind to Europe’s influence on China’s strategic posture inhibits it from taking on a larger, independent role in strengthening allied deterrence. First, China-Russia rapprochement after the invasion of Ukraine in 2022 has implications for European security. Second, Europe’s stake in China’s economy makes it a rival and competitor beyond geopolitics.
Europe can continue to influence Euro-Atlantic security, and deterrence, in more ways than it acknowledges. It can primarily do so by raising the costs of China’s involvement in Ukraine and its convergence with Russia. But US efforts to integrate allied strategies with its own security priorities must, foremost, be credible and resonate with its own allies.
Madison Schramm, Assistant Professor, Department of Political Science, University of Toronto
The US foreign policy community spends precious time and intellectual resources trying to discern how to effectively deter other states. How do we prevent China from attacking Taiwan or North Korea from attacking Seoul? How can Washington, through threats of punishment or denial, credibly convince them that the costs of these actions far exceed their potential benefits? Analysts debating these questions have routinely lamented a crisis in American credibility, emphasizing, in particular, the harm done by Obama’s failure to enforce a red line on chemical weapons use in Syria. But the critical obstacles to effective deterrence (independent of the wisdom of any specific deterrence policy) are, unfortunately, far more complex than a line in the sand.
International relations scholars disagree on the role(s) of red lines in effective deterrence, including the effects of walking them back. Recent scholarship suggests that even if a single failure to enforce a red line in one area affects reputation and therefore credibility in other areas, it will be, at most, a small component of a country’s overall deterrent ability. First of all, when communicating the intent to deter an adversary, talk can be cheap and threats unaccompanied by concrete or costly commitments are more likely to be seen as unpersuasive and low-priority. A country backtracking on such a threat might not tell potential adversaries much about what the country would do if pushed on an issue it clearly cares more about.
Secondly, an individual president’s reputation may be distinct from that of the country as a whole. For these reasons, when foreign powers assess the US’s credibility and try to predict future behavior, other factors may very well loom larger.
States often infer others’ credibility on the basis of capabilities — for instance, does a state have the ability to follow through on threats? Given the US’s preponderance of military and economic power, calling Washington’s bluff when there is inconsistency between rhetoric and policy is an inherently risky move. Inconsistency or unpredictability in threats and deeds may, in that sense, offer some benefit in coercive bargaining. If a country’s record of follow-through is unreliable as a guide, but it has the requisite capabilities to pose a threat — and a history of aggression and overreaction — others may be more inclined to assume the worst and take threats as sincere (though this has its limits). Credibility is also assessed by estimating a state’s “intrinsic interests” or the value attached to a particular issue or territory. A persistent challenge in deterring China from attacking Taiwan is that, given their proximity and historical relationship, Beijing may value Taiwan’s subjugation more highly than Washington values its autonomy.
There are a number of challenges to developing an effective deterrence strategy, even when the US is able to signal resolve. In practice deterrence is never only between two states — deterrence between the US and North Korea involves Russia, China, South Korea, Japan, and the Philippines, just to name a few. This makes the interactive and second-order effects of deterrence much more challenging to anticipate. Further complicated by increasing ties between states including trade, communications, and newer tech such as cyber which both introduce additional avenues for escalation and pathways for a state to hedge against threats of punishment. Crafting deterrence policy is complex and, in terms of efficacy, has often been a mixed bag. There are plenty of things to worry about here, but I would take red lines off the list.
Eyck Freymann, Hoover Fellow, Hoover Institution, Stanford University
Strategic deterrence is typically understood to be mainly about nuclear weapons and other weapons of mass destruction (WMD). Today, however, unconventional forms of strategic deterrence are rising to the fore, including in the economic realm. Both sides recognize this to be the case. While China views nuclear weapons as its primary deterrent, open-source publications from China’s nuclear community regard “deterrence” as encompassing non-nuclear considerations as well. Indeed, the deep economic ties between the two nations create both vulnerabilities and opportunities for strategic leverage.
Since around 2018, when the US-China trade war began and discussion of economic “decoupling” began in the public sphere, Beijing has become increasingly aware that it needs a plan for economic warfare, as well as political and military conflict. Chinese strategists particularly worry about two potential US approaches: comprehensive economic sanctions designed to isolate China and wear it down over time, and targeted “monetary sniping” aimed at destabilizing China’s financial system in the short term, which may include sanctions and other measures. China lacks comparable tools to strike back at the United States in the financial domain, though it could try to use cyberattacks to trigger panic. China’s economic deterrent resides in its central position in global supply chains — and its ability to destroy, disable, or deny access to semiconductor fabs in Taiwan. China’s economy cannot survive indefinitely without access to global markets, but it can survive a massive disruption of international trade for at least several months.
In Washington, some policy analysts argue that to deter Chinese aggression against Taiwan or treaty allies, Washington should threaten a “Russia-plus” sanctions response. This approach would build upon lessons learned from current Russian sanctions, which are viewed as insufficiently muscular because they did not try to shut Russian energy out of the global market. The logic of this deterrent threat is that the United States should create as much uncertainty as possible as to how it would respond economically in a crisis. If China moves against Taiwan, to devastating economic effect, the United States might launch an equally devastating reponse. Both sides would pay a terrible price, and other countries would suffer collateral damage. Supporters of this approach argue that maintaining the threat has induced China to invest resources unproductively, including by stockpiling food, fuel, and other resources, and forces Xi Jinping to think about existential risk when he contemplates major revisionist actions. In short, the threat is “economic mutually assured destruction.”
This approach to deterrence has merits, but it also has challenges that recall the Eisenhower administration’s nuclear doctrine of “massive retaliation” in the 1950s. Escalation to strategic nuclear war would not have been a rational response to low-level provocations. The Soviet Union could therefore achieve its goals through “salami-slicing” tactics, as Henry Kissinger, Thomas Schelling, and other analysts noted at the time. By the early 1960s, the United States had adopted a new deterrence paradigm of “flexible response.” Today, similarly, there is evidence that economic experts in China dismiss the credibility of a “Russia-plus” sanctions scenario. While China has implemented some protective measures against potential US-led economic shocks, it is growing increasingly confident that an initial financial blow would not be fatal. Beijing is also using salami-slicing tactics by delivering weapons to Russia in clear defiance of the Biden administration’s sanctions threats.
Furthermore, two features of great power economic warfare in history suggest important ways in which the analogy to nuclear mutually assured destruction falls short. First, major powers typically possess highly adaptable economies that can reconfigure to maintain war-fighting capabilities despite external pressures. There is no example in history of a great power’s economy collapsing immediately upon the initiation of economic or financial warfare, though Beijing certainly looks to Thailand 1997 as a nightmare scenario. Second, the global nature of trade makes it extremely difficult to maintain truly comprehensive sanctions, since alternative trading routes and partnerships often emerge, creating “leakage” that undermines the effectiveness of economic restrictions. These factors suggest that while economic measures can be powerful tools of statecraft, they are not like nuclear weapons, which threaten to permanently irradiate the places where they are used.
This understanding should inform US strategic planning. Integrated deterrence must have an economic component, but threats of economic massive retaliation are by themselves insufficient to sustain deterrence. The United States and its allies need a broader suite of economic policy options that demonstrate their ability to hold together and prevail in a protracted conflict in which significant amounts of trade continue to flow. Reducing US and allied vulnerability to China’s economic coercion in peacetime must be a key goal. Since economic linkages with China are unlikely to be unwound completely in peacetime, showing the ability to achieve an effective and orderly full decoupling during and after a crisis is also essential. At the same time, any efforts to achieve de-risking or decoupling must be embedded within a broader affirmative vision for global economic security. US economic statecraft will contribute to deterrence only if it can harness the incentives of third countries and private firms to align with US security objectives over the longer term, including in contested environments.
Paul Saunders, President, Center for the National Interest
As US officials and legislators work to position the country to compete with a growing list of dangerous rivals and adversaries, they should take a hard look at America’s overreliance on unilateral economic sanctions. Considering that even coordinated multilateral sanctions programs have had only very limited effect either in compelling desired behaviors or in deterring undesirable ones, unilateral sanctions have little demonstrable value.
There are several reasons for this. One is that America’s share of the global economy and in global trade has been decreasing for some time. US gross domestic product in constant dollars was 31% of global GDP in 1960 but had declined to 24% by 2020. In parallel, and even more importantly, the United States lost its position as the world’s preferred trade partner; America was the top partner for more than 80% of other countries before 2000, but in recent years, it holds this distinction in only about 30%. These new realities are unintended consequences of American successes in establishing a generally peaceful world that allowed many other nations to develop, on one hand, and in integrating China into the international trading system, on the other.
Another reason is that even multilateral sanctions are easier to evade that most elected officials and policymakers seem to realize. This is partly because once a particular sanction is defined in a precise legal manner, the definition itself provides a road map for avoidance, whether by transferring assets from one person or company to another, hiding or forging information, engaging third parties, or finding other solutions.
These various strategies have been an ongoing feature of Russia’s sanctions evasion, for example, in the sudden surge in the European Union’s trade with various Central Asian countries after Russia’s invasion of Ukraine. While some thoughtful analysts question the long-term effectiveness of Russia’s so-called “shadow fleet” in avoiding the Western oil price cap, Russia has nevertheless maintained sufficient oil export revenue to avoid significant economic, social, or military constraints on. Putin’s warfighting.
Finally, and perhaps most importantly, governments imposing economic sanctions generally see sanctions as an attractive alternative to wars they don’t want to fight. Governments targeted by sanctions typically have a very different view; they see sanctions as aiming to force their defeat, or to force defeat-like concessions, as war by another means, and even as threats to existential interests.
In his memoir Present at the Creation, Dean Acheson quotes another US official’s report of a conversation with Japan’s special envoy to Washington on Dec. 2, 1941. Describing America’s asset freeze and oil embargo on Japan, which the United States imposed in an effort to halt Japan’s ongoing war in China and movement toward Southeast Asia, Ambassador Saburo Kurusu reportedly said to his US interlocutors that “the Japanese people believe that economic measures are a much more effective weapon of war than military measures; that … they are being placed under severe pressure by the United States to yield to the American position; and that it is preferable to fight rather than to yield to pressure.”
Kurusu’s view reflected the Japanese leadership’s conviction that it faced an existential threat to its sovereignty from American power. Pakistan’s former Prime Minister Zulfikar Ali Bhutto, who was determined to develop nuclear weapons, also saw an existential threat to his country, in that case from India’s nuclear weapons program, and reportedly said, “We will eat grass, even go hungry, but we will get one [nuclear weapon] of our own…. We have no other choice!” Governments and, in many cases their citizens, are prepared to make great sacrifices in confronting what they perceive as grave challenges.
To be clear: this is not a call to unwind all existing unilateral US sanctions. Rather, it is a suggestion that policymakers should think hard before adding to the existing list, especially when sanctions impose significant costs on US firms and workers without a good chance to deliver real results. Over time, the United States can also look for ways to eliminate some existing unilateral sanctions, ideally through negotiations that win modest or at least face-saving concessions to the United States in order to avoid appearing to retreat.
MacKenna Rawlins, Research Associate, Reimagining US Grand Strategy Program, Stimson Center
US National Security Advisor Jake Sullivan has said that de-risking is the key component for managing competition with China. However, a lack of clarity surrounding the intention for reducing interdependencies with China leaves room from Beijing to assume the worst. The strategic endgame of de-risking is unclear from an international perspective.
De-risking is poised to be a form of coercion that deters China from unfair trade practices that help it attain advanced technologies, and it reduces the US’ susceptibility to potential Chinese economic coercion. De-risking is not economic deterrence. To deter is to prevent an actor from taking an action, therefore if China is already doing that action, it cannot be deterred. Instead, China would have to be compelled to stop its behavior. However, assurances are missing from the US’ strategy for competition with China. If the punishment is already being enforced, without assurances or an opportunity for relief, China has no incentive to change its behavior.
Increasing self-reliance to reduce supply chain vulnerabilities is strategic, however the US — try as it may — cannot produce everything. It does not have the comparative advantage to do so, nor the resources to force it. Beijing can appreciate the strategic need for self-reliance, but does not appreciate efforts that resemble containment. This approach to competition with China — de-risking — is best exemplified by the CHIPS Act, which is set in place to counter China by limiting its access to advanced semiconductors and attempting to spur domestic manufacturing and research and development in this sector. However, there is no “end date” to it, and it has motivated China to develop an indigenous supply of semiconductors.
The result has been a concerted effort by China to develop alternatives — alternative partnerships, trade flows, currency media, and an alternative understanding of the international order — as opposed to correcting its trade practices. As an export-oriented country, China would find other markets to sell to if the US has closed its ports. This effort naturally involves actors that are marginalized or excluded from “doing business” with the US such as Russia and Iran. But there are growing multilateral relationships between China and hedging states such as Brazil, India, Pakistan, Indonesia, and other developing countries in the Global South. Which, in turn, reduces the effectiveness of future US economic coercion against Beijing.
There is an underlying message to de-risking: the US is safe proofing its economy and supply chains from the fallout of a potential conflict with China. This could be a dangerous message to Beijing as it could signal the US’ desire to lower the cost of war, triggering retaliatory decoupling. Yet, there is a competing argument to reducing vulnerabilities to potential Chinese economic coercion, as it also reduces the US’s economic leverage for coercion.
Additionally, de-risking will not deter China from attempting to take over Taiwan. Given the complexity and ambiguity of the US’ involvement in a Taiwan contingency, having more options for economic coercion is a strategic option to keep open if military engagement is not guaranteed. As US Secretary of State Antony Blinken explained in regards to imposing sanctions on Russia to thwart an invasion on Ukraine, “the purpose of those sanctions is to deter Russian aggression. And so if they are triggered now, you lose the deterrent effect.” Taking away China’s access to US markets and advanced technology, takes away the opportunity of punishment if China were to try to overtake Taiwan. By reducing interdependencies during peacetime, the US is motivating China to adapt and find alternatives.
The US needs to be clear about what risks it is trying to avoid. Is it protecting itself against unfair trade practices that harm domestic industries? Is it mitigating an over-reliance on importing critical goods from China? Or is it cutting interdependencies so that if a war were to break out, the US wouldn’t be at the mercy of China’s economic coercion? While these may not be mutually exclusive, it is vital that the US is clear about its intentions, especially if it is directed at shaping Chinese economic behavior. If the message is not clear that de-risking is about unfair trade practices and American manufacturing, then it will be viewed as economic warfare aimed at stunting China. This is vital to help mitigate a Chinese perception that the US is preparing for conflict. Setting reassurances for changes in unfavorable behavior is one way to avoid this misperception.
