The U.S. navigates a perilous world that is now challenging the fundamental purposes of America’s foreign and international economic policies — chiefly the security and prosperity of its citizens and allies.
Authoritarian foes have combined resources that rival the capacity and technological sophistication of the U.S. military as well as America’s NATO and Asian partners. Engagement and diplomacy have come up short, or the U.S. would not have its hands full with Russia in Ukraine, a war in Gaza and China in the Pacific.
“Trade increases the wealth that Beijing uses to modernize and amass military power.”
China may not yet have achieved technological parity — it still requires Western knowhow to mass produce the most advanced semiconductors — but applying purchasing power exchange rates, its economy is at least as large as the U.S.
The U.S. faces this problem because while China’s growth is slowing, it is still growing fast enough. The country’s property sector problems notwithstanding, GNP grew 5.2% in 2023, while the U.S. economy advanced 2.4%. China’s growth is boosted by the huge trade surplus it enjoys with America and growing exports to Southeast Asian nations.
America needs to be more aggressive by rebalancing that trade with tariffs and accelerating the relocation of production to other parts of Asia and Mexico by joining the Trans-Pacific Partnership.
Critics of derisking may lament the costs that could be imposed on the middle class by more regional trade agreements or from severing existing supply chain relationships in China, but they fail to consider how trade increases the wealth that Beijing uses to modernize and amass military power.
“Enhancing economic ties with Pacific allies would offer a counterweight to their dependence on China.”
Enhancing economic ties with Pacific allies would offer a counterweight to their dependence on China as an export market and source of raw materials and manufactures. It would strengthen their growth and capacity to support militaries that may join American forces in defense of the region.
The Hamas attack on Israel discredited U.S. efforts to court Iran and encourage normalized relations between Saudi Arabia and Israel, while tolerating Prime Minister Benjamin Netanyahu’s resistance to a Palestinian State.
With Jews being less than half of the population east of the Jordan River, the latter is untenable. Whether a two state solution or an international administration is established for post-war Gaza, Israel, U.S. forces and international shipping remain vulnerable to Iranian-backed terrorist attacks from Hezbollah in Lebanon, Houthis in Yemen and elsewhere.
Any solution must involve neutralizing these threats but also building vibrant economies to support peaceful regional cooperation as China and Western industrialized countries become less dependent on oil. It is not too early to consider a TPP-like trade pact for the Middle East, with U.S. and European involvement, that could follow normalization of diplomatic relations among principal actors to create mutually reinforcing economic development.
Meanwhile, Russia has proven that sanctions alone don’t work. Its economy is functioning well enough to support its war with Ukraine for years through trade with China, India and others. The West needs to give the Ukrainians the air and other resources to destroy Russian defensive positions and logistics. Moreover, encouraging the integration of Ukraine into NATO and EU is vital, as would be U.S. free trade agreements with the U.K. and EU to strengthen their economies and capacities to support adequate defense spending.
China has numerous ways of taking Taiwan without too much risk. It could occupy one of Taiwan’s smaller islands and ask for an international conference on the future of Taiwan, mount an attack on Kinmen and Matsu, impose a naval blockade or wear down Taiwan through military intimidation. These possibilities expose the challenges the U.S. military faces, with only distant bases able to come to Taiwan’s aid.
The alternative is for the U.S. to be clear that an attack on Taiwan is not only something the U.S. will risk repelling, but that further Chinese harassment in the Taiwan Strait and shows of force in the South Pacific will be met by harsh economic actions. An attack on Taiwanese territory will be matched by naval and air confrontations far beyond Taiwan, featuring U.S. attack submarines and Chinese targets more accessible to the U.S. Air Force and Navy.
All of this requires strengthening U.S. forces — spending more money on the military and spending it more effectively. In addition, Biden administration policies on trade need realignment and a reluctant Congress must be persuaded.
The alternative is for the U.S. military to become increasingly tied down preparing for a potentially unwinnable war over Taiwan and drained by supporting endless conflict in the Middle East and Ukraine.
Moving on all these fronts now would put the Biden administration in a more offensive posture prior to the November 2024 election. Encouraging a world order that strengthens partners, reasserts American leadership and offers voters a counter to President Trump’s isolationism.
Peter Morici is an economist and emeritus business professor at the University of Maryland, and a national columnist.
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