A Taiwan Crisis and America’s Industrial Base

During Chinese President Xi Jinping’s early June visit to North Korea, Kim Jong Un confirmed his support for Beijing’s “One China” principle, which has long been used to claim sovereignty over Taiwan as an inalienable part of China. Following North Korea’s support for Russia in its war in Ukraine, including an estimated 15,000 troops, questions have been raised about whether Pyongyang could play a role in a potential military confrontation between China and Taiwan.

If such a crisis erupted over Taiwan tomorrow, the United States would likely find itself stretched thin, given that its industrial capacity has been seriously weakened by decades of offshoring. To be sure, a prolonged conflict in the Asia-Pacific is a scenario that U.S. policymakers have anticipated and prepared for over the years. However, even the most carefully planned strategic scenarios cannot make up for gaps in Washington’s ability to manufacture the ships, missiles, and other weapons components needed to support a long-term response.

Such weaknesses in the U.S. defense industrial base no longer represent a mere economic issue; they now pose an immediate strategic vulnerability. On June 17, U.S. President Donald Trump invoked the Defense Production Act, enabling the Department of Defense (DoD) to establish voluntary agreements with private providers to break bottlenecks and accelerate supply chains. Following a protracted war in the Middle East over the past few months, during which Iran’s asymmetric capabilities significantly depleted the U.S. military’s weapons stockpiles, critical shortages of rocket motors, igniters, guidance systems, and air defense interceptors emerged. The emergency expansion of domestic weapons production through deals such as the $1 billion investment in L3Harris’s rocket motor facilities aims to plug the holes in a manufacturing landscape that is severely skewed in favor of international partners.

The offshoring of America’s industrial base began shortly after the collapse of the Soviet Union and went hand in hand with the integration of international markets under a more globalized trade network. As more opportunities opened up for American firms in the form of cheaper labor and higher corporate margins in emerging economies, several of them moved a portion of their manufacturing overseas. Today, thousands of defense subcontractors supplying the DoD and producing critical components are based abroad, and some electronics and metals that the U.S. relies on can even be traced directly to China.

Alongside the dilution of domestic manufacturing through foreign-based suppliers, China’s rapid economic rise compounds U.S. strategic vulnerabilities. China serves as a central hub for critical minerals, advanced electronics, and renewable energy technology, while its manufacturing scale and processing capacity mean that several U.S. industrial interests run through its primary geopolitical competitor. Beijing has already demonstrated on multiple occasions that it is willing to weaponize its control over supply chains, first in a major incident regarding rare earth shipments and most recently as a direct response to U.S. restrictions on semiconductor and technology investments.

A war between China and Taiwan, with the U.S. potentially continuing to act as the provider of defensive arms to Taipei under the provisions of the Taiwan Relations Act, could exploit the above overlapping vulnerabilities at the same time. A conflict could simultaneously place enormous pressure on semiconductor supply chains, shipping routes, and access to manufacturing hubs, acutely highlighting how much of its industrial capacity the U.S. has allowed to migrate offshore over the years.

The immediate problem this poses is not measured simply by the number of factories based on U.S. soil as opposed to those operating abroad, but by the much wider network of trained professionals and suppliers that migrated away with them. Without a broader revitalization project aimed at rebuilding these networks, increased federal budgets alone will not resolve the capability gap. One concrete solution already being applied in the industry comes from companies such as Hadrian, which uses software-driven automation in the manufacturing process to standardize production and make up for the shortage of specialized labor in the field. The speed and scalability of this solution are particularly relevant for the defense industry, where AI-driven, autonomous factories of the future, such as Hadrian’s Opus-powered system, could serve as a new manufacturing model capable of meeting the requirements of 21st-century competition.

As the Asia-Pacific strategic environment may expose the limits of the U.S. longstanding approach of treating manufacturing as a primarily economic calculation, rebuilding the foundations of an indigenous defense industrial base may feature more prominently in Washington’s near-term policies. The war with Iran not only highlighted that U.S. weapons stockpiles are easier to deplete than previously believed, but also that their speedy replacement may face significant barriers.

If the U.S. wants to maintain a credible deterrence posture in the Middle East, the Asia-Pacific, or any other strategic arena of importance, it should urgently prioritize the elimination of vulnerabilities across its supply chains. The true test of the next confrontation between the U.S. and an adversary will be military strength as well as the ability to materially sustain it.