TRANSCRIPT:

Kahl: You're listening to World Class from the Freeman Spogli Institute for International Studies at Stanford University. I'm your host, Colin Kahl.

Today, I'm thrilled to be joined by Eyck Freymann to discuss his terrific, timely, and thought-provoking new book, Defending Taiwan: A Strategy to Prevent War with China. This is the book, proof of life. Eyck, congratulations for making it real

Eyck is a Hoover Fellow at Stanford University, where he directs the Allied Coordination Working Group. He's also a non-resident research fellow at Columbia University's Center on Global Energy Policy, the Institute of Geoeconomics in Tokyo, and the China Maritime Studies Institute at the U.S. Naval War College. In his book, Defending Taiwan, Eyck outlines a strategy to integrate U.S. military strength, economic leverage, technological leadership, and diplomatic influence into a single, coherent plan to prevent war across the Taiwan Strait.

He convincingly argues that America must work with allies to develop a bold new vision of technological and economic statecraft to address the growing risk that China will act aggressively to seize Taiwan and make plans to secure U.S. interests if deterrence fails.

Eyck, welcome to World Class.

Freymann: Thanks so much for having me on, Colin.

Kahl: Let's start with the basics. What inspired you to write this book and why should the average American listening to this podcast care about the fate of Taiwan? Is it the fact that Taiwan is a democracy? Is it its geography and the so-called first island chain? Is it the possible implications on our security commitments throughout the rest of Asia? Or is it about semiconductors and AI and supply chains? Like, why should Americans care about Taiwan?

Freymann: When I got into studying China as an undergraduate, the reason was that I thought China's interests were global. In my graduate studies—the work that turned into my first book— I looked at the Belt and Road Initiative: how China used money and deals for political influence around the world. And I went on the trail of this initiative from Sri Lanka to Tanzania to Greece, and ultimately to Greenland, where I wrote my PhD.

Kahl: So, you were studying Greenland before it was cool.

Freymann: I was, in fact, studying Greenland. And it was very cool, but more in the temperature way. Greenland's a terrific place to be. And I think we discovered increasingly why it matters in the context of China's Arctic strategy. But it just gives a sense of the scope and the scale of China's ambition.

China's interests do not stop with its region. China wants a full transformation of international order to serve its interests for what the party believes will be centuries or millennia of CCP rule. And it is being methodical because it thinks it's laying the groundwork for that. Taiwan happens to occupy this very particular place in the CCP's ontology because it's the unfinished business of their civil war and because it's fundamentally bound up with relations with the United States.

So I became interested in this during my graduate studies. The origins of the project was that I asked a friend of mine—a naval historian—just an encyclopedia of all things military—to give me the book that I should read to understand this issue: what the military balance looked like and how it was changing, what a war with China would actually involve and what it would take to win, and just how dire the situation actually was.

And he said, well, no book like that exists. I can send you a thousand articles. Thus began this collaboration to figure out the military aspects of this story.

But the more that I researched it, the more I realized this is not a purely military issue. In fact, the military analysis is the easy part. China has a whole battery of options for how they could move against Taiwan. But the really significant ones involve creating crisis scenarios that break U.S. resolve and shatter our alliance structure.

And the way that China thinks it can do that is pushing on where we are weakest, which is in the economic domain, our inability to take pain.

And this gets to the heart of why Taiwan matters. Taiwan matters most obviously because they make the chips. 90% of the world's advanced chips, 99% of the true cutting-edge Nvidia chips that train the advanced AI models.

Taiwan matters geographically because if China could ever use it as a forward base for its Navy, it could project power all around the region in a way that it really can't today because of the U.S. position in these islands that we call the First Island Chain.

But then the third reason, the most globally significant, is that the way China would move against Taiwan would set norms about how they are going to seek to achieve regional hegemony and eventually global hegemony,

And the thing to understand here is this is not a continental region. The Indo-Pacific is an archipelagic region. You have economies that are basically not energy secure, not food insecure, the most trade dependent economies in the world, and they make everything. Pretty much nothing significant in the world doesn't include some thing that has to be made in this region. And that means that the sinews of commerce, which are mostly private airlines, private shipping companies, operating through international airspace and international waters, these are the lifelines of this region.

And if China can take control of that without firing a shot, that is how they will eventually achieve world domination.

So the question of how China might move against Taiwan, if they move against Taiwan in a non-military way, really matters because of the precedent it would set and what the United States would reveal in how it responds.

Kahl: I want to dig into that a lot because you have a lot to say about that. But I want to double click on one thing that you didn't mention in your litany of reasons why Americans should care about Taiwan, which is it's an island of 23 million people. And it's one of the most vibrant democracies in the world, frankly. Is that also something that Americans should care about that, China does not do to Taiwan what China did to Hong Kong, which is to snuff out a vibrant democracy and the world just kind of moves on?

Freymann: It’s absolutely a U.S. interest. The U.S. has a principled position on this. We don't take a stake in Taiwan's status, so we don't have a position on what that is. This is for Taipei and Beijing to work out by themselves. But we don't want it resolved by force or coercion, and any resolution has to be democratically acceptable to the people of Taiwan. Why? Because of the precedent that it sets for the broader region, not just for Taiwan itself.

Obviously, given what we have seen in Ukraine and elsewhere, Taiwan is a vulnerable democracy under threat from an authoritarian superpower. Allowing them to be extinguished would be a very bad precedent. But we cared about Taiwan before they were a democracy. And if something happened and Taiwan ceased to be a democracy, we would still care about Taiwan.

And at a moment where support for democracy worldwide is increasingly politicized, I'm emphasizing these three other material interests because these are things that everyone from the most progressive Democrats to the most fire-breathing MAGA Republicans can all agree on.

Kahl: That makes a lot of sense. I mean, look: you've already established that China has perennial interests in Taiwan because it's difficult for the CCP and for President Xi Jinping in particular, to imagine achieving their goals for national rejuvenation and greatness without reabsorbing Taiwan.

And you've established that there are perennial U.S. interests that are both material and values based.

I now want to talk a little bit about the infamous 2027 timeline. So my understanding of how this originated was during testimony by Phil Davidson, who was an Admiral and the Commander of Indo-Pacific Command back in 2021, who basically said that China could make a move in the next five years. And then I think Bill Burns, who was the Director of the CIA, clarified a year later that 2027 was a potential period we should be focused on for the prospect of invasion of the mainland on the island of Taiwan.

Talk a little bit about that 2027 date, because it's almost established this kind mythological status in some circles. And I think there's a lot of misunderstanding about that date. Can you talk a little bit about that?

Freymann: Completely agree. The date 2027 has been overplayed. The date that matters most is 2049. That's the hundredth anniversary of the establishment of the People's Republic of China. And Xi Jinping will be 96. So he probably thinks that he'll be around, but who knows. That is the deadline he has set for achieving national rejuvenation, which is his all around vision for putting China at the forefront of essentially every human endeavor.

The line I like to use is he wants China to win every gold medal at the Olympics and every silver and every bronze. This is not just about foreign policy. This is about technological supremacy, ethnic harmony, cultural flourishing. It's the works.

And Taiwan fits into this story because historically speaking, the division of China is a thorn in the side of the CCP. Taiwan being a free, vibrant, technologically advanced society right across the water, is living proof that the CCP is not the ‘end of history’ for the people of China, that there's an alternative version of China that is actually better in pretty much every way to live in.

So there's a whole bunch of reasons why taking Taiwan in a way that humbles the United States and pushes the United States out of the region could supercharge China's pathway towards achieving the rest of national rejuvenation.

But 2027, as Xi Jinping has described it, is just an intermediate date. For him personally, it's a significant year because there's a party Congress in 2027. He'll be up for a fourth term, which I think he's overwhelmingly likely to get. But it's a date that he's ascribed as a readiness deadline in a number of different domains, not just military.

We knew before Admiral Davidson's statements that China had set 2027 as what they call a “building goal” for the PLA. It was also a goal for various technological and economic benchmarks. And the question is, what exactly does this building goal mean? The way that I interpreted the Davidson testimony is we have some intel that suggests Xi Jinping said, this means build the capability to take and hold Taiwan.

And it was always dubious whether China would get that capability by 2027, just because so much has to go right to make an amphibious operation work. And I think now that we're coming up against that date, most of the military analysts I talked to think they're not quite ready yet. They've come a long way, but there's still some gaps in their force structure that they would really like to fill.

But I think the way to think about it is we are nearing an inflection point where Xi Jinping feels confident enough in his own armed forces that he can start taking more risk. Which means we're entering a new chapter in this competition in the gray zone. And these military capabilities matter. They shape the dynamics of crisis even if they're not actually used.

Kahl: So I think that's really important and I want to drill down on this a little bit because you know my understanding when when I worked at the Pentagon was that 2027 was basically a deadline for his generals to report back that they could do this if he ordered that they should do this. But in part he was lighting a fire under them because he didn't think they could do it, that he doesn't have a lot of faith in his military. We've seen almost an endless series of purges that speak to the fact that she does not completely trust his military [and] thinks a lot of them are corrupt.

And so again, I think the 2027 date has been a little misinterpreted. I also, though, think it was useful in our own system to light a fire under us about the urgency of this issue, even if it wasn't 2027.

Freymann: Anyone who's ever taught undergraduates knows sometimes you just need a deadline.

Kahl: Yeah, but then they always email you three minutes after the deadline to ask for an extension.

I do I want to drill down on whether events in the past couple years outside of China may be affecting Xi Jinping's thinking a little bit. So obviously, in 2022 you get the all out invasion of Ukraine by Russia. On the day of the invasion, Russia looked on paper like the second best military in the world. They certainly had a lot of combat experience in places like Georgia and Ukraine in 2014 and Syria and elsewhere.

And yet a day later, they barely looked like the second best military in Ukraine. And I think what that illustrated is real war is real hard. Meanwhile, this year you've seen the Maduro raid, you know, that's an ally of Beijing. You've seen the Iran war, which has had mixed results strategically, but it's been pretty devastating militarily to the Iranians, a close partner of China.

So when Xi Jinping looks at these wars, do you think he draws the conclusion that war is easier or harder? And does that put more time on his clock?

Freymann: This is ultimately a speculative exercise. I wish we had a Being John Malkovich view into Xi Jinping's head.

Kahl: I mean, for all you know, the NSA does, but we can't talk about that.

Freymann: Yeah, those are secret capabilities. Maybe Claude Mythos will solve that one for us.

I think lacking that, lowly, unclear Stanford scholars like me have to read the tea leaves from the open sources.

Clearly, the U.S. decision to burn 25 to 40 % of our long range precision munitions and considerably more of our air defense interceptors in Iran was not the most enlightened decision from the perspective of deterring China over Taiwan. But I think it's significant that we paused there and we didn't burn the rest.

I also think that as the character of warfare is evolving and unmanned systems—which you can make in quantity very cheaply—continue to proliferate and get more sophisticated, Taiwan's options for defending itself Improve.

And when you think about what is involved in taking tens of thousands of men across the strait . . . which, granted, is only one of several scenarios for how China can move against Taiwan. They can cyber attack Taiwan, they can bombard Taiwan, they can blockade Taiwan.

But if they actually want to take and hold the island, what does it involve? They have to put tens of thousands of men on the ground, which means they need a beachhead or an airhead. It's very hard to deliver a significant number of people by air, as we saw in Ukraine, because it's just so easy to take down planes and helicopters with cheap things like stingers.

And the alternative— amphibious ships across the strait—they got lots of them, but Taiwan basically knows what the harbors and ports are that would be attacked. And it's relatively cheap with surface drones, underwater drones, aerial drones, naval mines, to make the Taiwan Strait a sort of hellscape.

Now there's so many questions. This question of would Taiwan fight? There's also a question of how resilient Taiwan's command and control infrastructure would be if it was bombarded for days on end. But if I'm China and I'm thinking about all of the things that have to go right in sequence for an amphibious invasion to go well.

When I consider these tail risk scenarios in which my guys are stuck in urban combat in Taipei . . . you walk through the streets of Taipei, you can see this is not a nice place to engage in urban combat. And you ask, how long will I have to resupply them? How many more transits across the strait will I need to do to deliver them food and medical and vehicles and fuel?

There are scenarios in which the opening campaign seems to be going well, and then it turns because China has these troops on the beaches who then get massacred. These scenarios, you can simulate them in all these ways, but ultimately no one knows. It's just much easier and simpler and more attractive to take the prize for free if you can.

And that is why the argument of the book is we can't take our eye off these military scenarios. They matter. But Taiwan's fate is more likely to be decided by a crisis than a war. And we got to deter the crisis, not just the war, because the crisis is bad. The crisis presents us with decisions that we are not currently set up or prepared to make. And how do you deter the crisis? You need a concept for deterring Xi Jinping in the gray zone, which right now is where the real action is.

Kahl: So I want to come back to that. I do think you made a really important point. If I'm Xi Jinping, on the one hand the United States burned through years worth of production of the critical munitions necessary to fight a war with China over Taiwan: long range strike capabilities like the new Prism missile or or JASM, advanced air defense interceptors for that, Patriot, and others. Not to mention relocating assets from the Indo-Pacific and all of the rest.

So on one level, the U.S. deterrence posture is inarguably weaker  in the Indo-Pacific and across the Taiwan Strait today than it was before the war with Iran.

On the other hand, I think both the war in Ukraine and the war in Iran show that even very powerful actors can be stymied by asymmetric approaches, especially using large numbers of attritable munitions. So, think of cheap missiles, especially cheap drones.

And that's, I think, a good news story for Taiwan and for the reasons that you point out. So I do think that's relevant. And I think it goes to this point the invasion is the riskiest outcome. I've participated in war games on Taiwan in the unclassified and classified settings, and they almost all culminate with whether China gets a lodgement, right? They get to the beaches.

And I think what you just compellingly argued is that, they don't just have to get to the beach once. They have to get to the beach every day with food and fuel and men, and then they have to crawl through the jungles and the mountains and occupy cities. It's a big deal. So if Xi’s going to do this, I'm convinced it's much more likely that he's going to do it through some squeeze—a quarantine, a blockade, a customs regime.

So walk through what you see as the non-amphibious invasion. If the Chinese don't do D-Day, what do they do?

Freymann: Well, the option that has drawn most attention for decades is blockade. And the reason is we've known for 130 years that you can blockade very easily with dumb mines. You seed them in the water and then no one wants to navigate through. And we're seeing this now in the Strait of Hormuz. Iran doesn't have a navy, they don't have an Air Force, they supposedly don't have any missile launchers, they don't have leadership that's willing to show their faces, and yet, they can shut down the flow of commerce through the strait.

And the United States can offer insurance to these vessels. The American president can tweet, show some guts. But these people don't want to die. And so they can make a rational calculation that it's not worth it. At some point, maybe that will change. But clearing mines is very difficult.

So, if China just wants to do a scorched earth medieval style siege, that option is on the table. And we have to take it seriously because if Xi Jinping persuades himself that this is an ugly but assured forced checkmate, he might be tempted by other options because he thinks, well, this is a guaranteed fallback plan. So I take the scenario seriously in the book because you have to show Xi Jinping that it is not assured victory.

And breaking out that blockade would be nasty. It would almost certainly involve large-scale strategic bombing inside mainland China. It would involve the risk of nuclear escalation. The challenge of resupplying Taiwan's population would be orders of magnitude harder than resupplying Berlin during the Berlin airlift of 1948-49. But it is still something that we should work on that I am sure the Pentagon has very detailed operational plans for, because you have to show China that we could do this if we had to while deterring nuclear escalation.

Kahl: What do you make though . . . so, there's the blockade or a scorched earth. But one lesson from the Strait of Hormuz is you can create the psychological risk that ships that get too close to Taiwan could be at risk. But you would also just impose a customs regime, right? That requires every ship coming in and out of Taiwan to check in on the mainland first.

And it wouldn't be putting mines in the water. It wouldn't be putting missiles onto the island of Taiwan. It would simply be to assert China's sovereignty over the island through a kind of lawfare and coercive means. What do you think of the customs possibility?

Freymann: Well, that's exactly right. And this is the scenario that I think is the most likely and dangerous. And I hope that we can dig into it. But the reason I talk about blockade first is that a lawfare customs quarantine thing: it's a completely different beast.

The reason that a blockade is an unattractive first move is that it has a lot of the disadvantages of war for China, but none of the advantages. It's not clear that Taiwan just surrenders overnight and it puts the Americans and the allies on notice that something extreme is happening. It's a totally barbaric humanitarian disaster. It's an act of war against the civilian population of Taiwan. And it causes our gargantuan global financial crisis because all of a sudden it's not just Taiwan. No shipper is going to get covered to go anywhere near Taiwan.

So all of the supply lines in and out of South Korea, Japan, mainland China, everything gets busted. So China creates this shock. It's horrible. It's economically disruptive. And then the rest of the world lines up behind the United States and says, well, we have to make them cut it out.

The reason that the quarantine scenario is attractive for China is it doesn't do any of that stuff. It doesn't break supply chains on day one. It doesn't trigger a financial market panic necessarily on day one. China just says, “We're just enforcing our existing customs law. We're not saying you can't deliver to Taiwan. We're just saying you have to come through a mainland port.”

The goal is: establish the principle without disruption. And then if the Americans accept it, they're checkmated. Because in the long run, China then can make the character of Taiwan's exchanges with the outside world a subject of gray zone pressure, and they can squeeze that dial all the way to black. And that is how China gets Taiwan's fabs intact. That's how they seize control of the engine of the AI revolution without the Americans destroying it.

Now the Americans always have the option of escalating it up into a war or disabling the fabs: blowing them up, cyber attacking them, what have you. Like the U.S. has this capability. But the decision to do that is really significant. The decision to do that is essentially a big red button on the president's desk that says the financial crisis that ends my presidency.

And what China's banking on is that we will just choose option A and allow Taiwan to slip away while pretending that nothing meaningful has changed so that we're totally screwed in the long run because we lose AI, but we avoid this really acute short-term crisis and the politicians get to kick the can.

Kahl: I think it's a real risk and one of the things that's hardest to deal with. So let's talk the solution set, which is essentially the last 60% of your book.

Back in 2022, when I was working at the Pentagon as the undersecretary for policy, we wrote the 2022 National Defense Strategy. At the heart of that document was this idea of integrated deterrence. Integrated deterrence meant a lot of things: integrating across the domains of conflict, but also integrating across the instruments available to the U.S. government, not just military, economic, diplomatic, technological, integrating across our allies and partners since that's kind of our ace in the hole globally, and integrating across the spectrum of conflict, recognizing you are trying to deter from the gray zone to nuclear war. That's a lot.

We were criticized by hawks in Congress and elsewhere for essentially offloading the idea of deterrence—which is traditionally thought of as a military instrument and predominantly as a punishment instrument—offloading that to civilian agencies like the State Department or Treasury or Commerce or others to use other tools so that we could lower the defense budget or something by offloading it to civilians.

My view was always, it was, “Yes, and . . .” The military had to be robustly capable of deterring and prevailing if deterrence failed, but you also needed to supplement that military deterrence with economic and diplomatic measures, which I think is squarely where your book lands.

So, walk our listeners through how you think of integrated deterrence and especially how you think about integrating these non-military instruments—political, economic—into deterring the types of scenarios you've been talking about.

Freymann: Well, first of all, Colin, this is why I'm so thrilled to be on this podcast, because as I describe in the book, your concept of integrated deterrent is the inspiration for what this is trying to do. Obviously, we didn't achieve the aspiration as fully as we might have in the Biden administration. And then in the Trump administration, we are essentially gutting the interagency process. We're antagonizing our allies. We're doing the opposite of whatever integrated strategy is.

But I think what you say is absolutely right. China has an integrated strategy for Taiwan and to achieve national rejuvenation generally. They link together every tool of their national power— their control of supply chains, technology, diplomacy, information operations and propaganda, the military, everything. It's organized towards a specific set of goals. And that gives us that gives them carrots and sticks to use against other countries and us.

We need to do the same thing or we are going to be outmaneuvered because we will not be able to muster the tools of our national power to push back effectively. And by the way, because we will never be able to beat the CCP and how we organize ourselves, we need allied scale to do a lot of this stuff in response. That is very much the spirit of the book. Before we talk about the pillars, though I'm happy to get into them.

My question for you would be, what did you learn over the course of the Biden administration? Is this just a pipe dream? Is it impossible based on how the U.S. interagency is set up to do integrated deterrence? Or is this the kind of thing that we could theoretically do if we had political leadership that was determined to do it?

Kahl: First of all, whose podcast is this, man? But I would just say this. The jury is still out. I think in the lead up to the Russian invasion of Ukraine, there were a lot of efforts to try to convince Putin that there would not just be military costs in the sense of helping Ukraine defend itself, but there would be economic and political costs to the Russians.

Obviously, that attempt to show that there was a wide range of costs that would be significant, also thwart his ability to achieve his objectives. It didn't succeed. Putin invaded the country.

On the other hand, I think if Putin knew what was coming in retrospect and looked back and says, look, four plus years on suffered a million casualties because of all the support we provided the Ukrainians. Russia was, at least for a period of time, significantly isolated from a big chunk of the world economically and also pushed into the arms of China and in weird ways made Russia dependent on countries like North Korea and Iran. Russia was basically unplugged from the West buying a significant amount of oil and gas from them, I don't think he would have done it. So I think the jury is still out about whether it is possible.

Xi Jinping, though, has seen all of those things, right? And so  my own view on China is Xi Jinping's theory of rejuvenation requires China to be thoroughly integrated into the world. And you can hold that at risk in some ways. And I take a lot of the substance of your book as pushing in that direction as well. So why don't you let our readers pull back the curtain and let them know a little bit about how you see the pieces of deterrence fitting together.

Freymann: Great. Let me dig into it. The reason that I ask this is I want to know if it's a pipe dream to think that these things can ever be done in combination. But here's basically what I think we should do in each of the domains. In the political diplomatic domain, we need to manage China, engage Taiwan, and establish our core coalition.

What does that mean for managing China? Keep the One China policy, but communicate to China that just because we have strategic ambiguity as to what we would do if they attacked, we're not going to stand idly by as they push in the gray zone. If they push in the gray zone, we will push back proportionately, in a manner that we think is proportionate, in a domain of our choosing to maintain an overall stable situation. And if we get wind of a potential big move on Taiwan, in the same that we had advance notice of Putin moving on Ukraine, we shouldn't say that we're going to wait until they fire the first shot to reveal what our action is. We should reserve the right to act preemptively. And that's all within the format of our existing One China policy. It's just changing how we communicate it.

Kahl: I think you'd call it structured ambiguity instead of just strategic ambiguity.

Freymann: I call this structured ambiguity. It's the same substance, but it's a new way of communicating our existing policy. Just to remind China that when they push in the gray zone, they are hollowing out their commitments to us under the three communiques. And those communiques are the political foundation of our relationship. And they should understand that there's risk associated with doing that.

With engaging Taiwan, you just have to show the people of Taiwan that we understand that they're a democracy under threat and that we stand with them. And that includes respecting the right of the people of Taiwan to make their own choices, which means not picking favorites in Taiwan elections, being willing to work with whoever they work with, supporting them with technology partnerships, energy partnerships, people-to-people exchanges, just being present for Taiwan.

And then the core coalition is making a statement that we have allies that have skin in the game too. Japan, obviously. They now say publicly it's existential for them. The Australians, it's arguably existential for too. If there's any kind of crisis over Taiwan that results in financial flows or trade in and out of China being messed up, I mean, that's a financial crisis in the UK because HSBC and Standard Chartered, the two biggest UK banks essentially . . . that is their bread and butter.

Then Canada, who obviously we've been abusing lately, Canada has skin in the game as well, because we are one big economy with Canada. And if we have to decouple from China, in whole or in part, for any reason, they are going to be collateral damage or they're going to be a country that gains opportunities from working with us.

So we need to bring this coalition together, start treating these partners with the respect that they reserve, and then do what we can to communicate with a common voice what we would do. If we had in the events to do something big and economic, we would have to work with this core coalition because the Europeans, they make these decisions by consensus. So it's less predictable what they would do.

Kahl: Before you go on to the economic, though, I want to ask you to go one layer deeper on the alliances piece. Because one of the things we saw early on in Ukraine was actually it wasn't just the North Atlantic community responding to Russia. It was actually a coalition of advanced liberal democracies in Europe, in North America, and in Asia, imposing costs on the Russians.

And I think my sense is that Beijing worries very much about a similar coalition being aligned against a raid against them. But to say the least, the status of our alliances right now . . . not so hot. what do you think? And I think they're probably better in Asia than they are in Europe in terms of the health of our alliances. But how much of the need to build this political coalition has been complicated by recent tensions with our allies?

Freymann: It has not gotten easier in the last 18 months. And I think we should brace for it to get worse. But we have common interests, these five countries that I named, essentially the big Anglo countries plus Japan, we have a common interest in deterring this crisis. And then if the crisis happens, we have a common interest in dealing with it effectively, working together.

And we have other allies with skin in the game too. I don't mean to leave out South Korea, the Philippines, but these countries, for political reasons and because of their vulnerability to China's economic coercion, they are very close to the core, but they may choose, depending on the circumstances, not to be the core of the core. And that's okay.

When we're thinking about coalition building, we need to be more flexible than saying you're in the tent or you're out. We need to understand this as essentially a group of concentric circles or overlapping Venn diagrams, where different countries might collaborate on different things. And that is essentially a call to expand the viewpoint from just treaty allies to partners too. And we can get to this and talk, we talk about economic deterrence.

Kahl: Yeah, let's turn to that. So you've talked about the political piece. There's a U.S.-China piece, a U.S.-Taiwan piece, and a U.S.-allies piece. What are the other aspects of integrated deterrence in your thinking?

Freymann: Well, there's conventional military deterrence, which is the standard deterrence by denial. Show them you could defeat the invasion of the blockade. And that means replenishing our magazines of these long-range precision munitions, air defenses. Air defense is critical for Taiwan. Making sure the right stuff is forward deployed in the region, including all of the fuel and the spare parts. Because our logistics chain would struggle in any kind of protracted fight. The distances are huge. It's a tyranny of distance.

Helping to build up the supply chains for stuff like drones. Revitalizing our submarine industrial base. It sounds like a lot and is a lot, it's a few hundred billion dollars over five years. And we've already bought about half of it. So on this issue in particular, at least, the Trump administration is doing reasonably well with the big exception, obviously, of spending down all these munitions in Iran.

Kahl: But know, the value of $1.5 trillion to try to make up for lost time.

Freymann: If they get even a much smaller version of their defense budget, that takes us a lot of the way there towards getting the conventional force in a position to sustain deterrence into the 2030s.

The nuclear side is trickier because strategic deterrence is no longer just about nuclear mutually assured destruction. Our nuclear forces depend on a command, control and communication system that extends to space.

ground stations that can be cyber attacked. And that means the resilience of our space architectures, our resilience to cyber, our offensive cyber. This matters hugely for this mutually assured destruction dynamic that looms in the background of any potential crisis or fight. And AI plays a role in this. And we don't really understand how. But as we see with this new Claude Mythos model, maybe AI very quickly could totally disrupt the cyber balance in a way that could be favorable to us, but also potentially unfavorable.

And I don't come down with a clear position, but I think we need to study this. In the short term, we need to stay as far ahead in AI as we can. And then we need to be open-minded about what some kind of arms control or more stable strategic balance might look like in the future, because AI, we don't really understand yet, but it will play a role.

Kahl: You used a really important word, which you heard a lot in the Pentagon in the last administration because it was in the National Defense Strategy. You hear less about it now. And that term is resilience, which is not a terribly sexy concept, but actually quite important to deterrence as it relates to China, because their entire theory of victory over the United States is to paralyze the networks that undergird the American way of war. Undersea cables, constellations in outer space cyber networks, critical infrastructure in the homeland that supports power projection. And so a lot of, think you're right to kind of emphasize that part of strategic deterrence succeeding is convincing China that they can't paralyze either our conventional or nuclear forces.

Freymann: So what is strategic deterrence? I define it as fundamentally a threat to the survival of another state or regime. And in a world where the CCP is increasingly paranoid, AI is increasingly useful for propaganda information operations, China's population has been kept isolated, not knowing about the world.

If you can potentially bust the great firewall and deliver messages about the corruption of the party and Tiananmen Square and all this other stuff to the people of the PRC, you could potentially deliver a devastating threat to the survival of the CCP and you don't have to nuke anyone and you don't have to shut down any critical infrastructure. But if I'm the ministry of state security, I'm very concerned about that.

And all this is to say, what strategic deterrence involves is expanding across domains in ways that we are only beginning to understand, and AI is deeply tied up with it. And potentially that's useful for us, but potentially it's also destabilizing. And I'm sort of kicking the can on this because there's only so much we can say at this particular point in time. But it does matter.

Kahl: Let's talk about two of the chapters in the book really drill down on the economic statecraft associated with integrated deterrence. You want to flesh that out a bit for our listeners?

Freymann: So there's a temptation to think of economic deterrence as an extension of strategic deterrence. The U.S. and China are so economically intertwined that if we shut down that relationship, it's like an economic nuke. And that is how I think members of Congress have thought about it. There was legislation called the Stand with Taiwan Act that would have imposed these crippling across the board sanctions.

I think that that basically doesn't work. Yes, there's some really, really extreme scenarios in which we could plausibly do that. But in the crisis scenarios that I think are most plausible, I don't think that option is strategically attractive or politically available.

And what's dangerous is that we don't seem to have an affirmative economic contingency plan. If we get into a crisis and the president says, “Give me options that don't blow up the world economy,” and the president's advisors say, “I'm sorry, sir, we haven't done our homework.” That seems like a big problem because then the only option left on the table is just capitulate.

And then if China learns that it can extort us by threatening us with economic breakdown, then they can do it again. So we need an affirmative vision for a post-rupture economic order on the table, plausible, discussed, something that in a crisis situation might plausibly be of interest to both Democrats and Republicans and a bunch of other countries, and which is structured to be flexible so that the details can be worked out in the event, because obviously you can't work out the details in advance.

And the framework that I talk about is called avalanche decoupling. The basic idea of avalanche decoupling is it's just fantasy to imagine that you can decouple from China all at once like a light switch. It's just fantasy. We tried that on Liberation Day.

Kahl: Avalanche decoupling for our listeners: massive secondary sanctions, cutting off all trade, cutting off all imports of components for critical technologies, those things?.

Freymann: Exactly. And we tried a version of this on Liberation Day. The president is like, a hundred percent tariffs on China. And then the stock market crashes and then the bond market crashes. And then various captains of industry call up and say, Mr. President, you have to reverse this or we're done for. And then within a week, the president is like, lol, JK, I'm rolling it back.We're making a truce. And that reveals to everyone, including to China . . .

Kahl: Then he later threatened to do it again and China calls his bluff by putting export controls on on rare earths and he and chickened out again

Freymann: And then we see another version of this in Hormuz, where Iran takes 20% of global oil offline, and now the United States is suing for peace and essentially abandoning all of its grand designs of regime change or ending Iran's right to enrich. The U.S. is on the back foot and it's because it can't take even a small amount of economic pressure.

So if we imagine scenarios where it's not politically available to make an already bad situation vastly worse. But China has revealed that this is an abusive relationship and they're going to use our economic dependencies to squeeze and coerce us.

What do we do? Well, basically there's two things you can do. One is you can cushion the short term blow with large scale fiscal and monetary action, like we did at the beginning of COVID, coordinated with as many other countries as possible, essentially help the world economy through the crisis rather than having the world go into depression and it's our fault.

So China's doing this to the world, but we're bailing you out. And then set in motion a process that will break your critical dependencies as fast as reasonably possible, and then leave the non-critical stuff to do later, if ever. In other words, it means not maxing out on punishment of China, but focusing on our own economic interests first. And then hopefully punishing China over time as a side effect.

And the way you do this in avalanche decoupling is with a tariff or a quota that moves. Let's take the example of drones and drone parts. Right now, the United States cannot make a drone without buying parts from China. And that's crazy. It's crazy.

But what are we supposed to do? Because if we say, starting tomorrow, you can't import drone parts from China, then we can't make more drones. The only way to do it is to phase it out, to say, on X date, we will no longer buy drones from China, or there's a tariff that is going to move up in a consistent way, or a quota that will move down in a consistent way, and then by date, it will be effectively impossible to buy from China. You'll have to buy it from some safe country.

I think we can do a version of that now for like the 1% of our trade with China that is most critical, the drones, the medicines, that kind of stuff. And you can do it in a way you coordinate with allies because the French and the Japanese, they don't want to be dependent on China for this stuff either. If you can do that now, then you have a proof of concept that if a crisis happens and we need to do it for 20% of our trade with China or 50% or 70%, that that option is available and that we know how we would do it.

Kahl: My experience, and maybe this is my bias, because I've worked at the Pentagon so many times, but I also worked at a White House, and I worked around a White House that tried to integrate around interagency planning. And it remains true that even in a White House that has a lot of process and really brings the interagency together, mostly you're reacting to crises. You're not doing break glass, day one planning for these things.

The only place that does that is the Pentagon. And I think what you're seeing in a place, in a situation like Iran is that the military piece of things, like what targets to hit, how to hit them, how to generate effects, is pretty remarkable, actually, because the military is really good at planning and executing that type of stuff.

But all the other stuff fell by the wayside. The diplomatic plan, the plan to deal with the economic second and third order effects, the diplomacy in the region with our allies. It's not a critique one way or another necessarily is just of of this war—people can make up their own minds about that.

But it's just to say when we don't bring all instruments together and plan around them ahead of time, it's hard and that that's not gonna happen naturally at places like Treasury and the State Department and Commerce and Energy. That's gonna be something that requires the White House to bring people together, knock heads, and keep people in windowless rooms for as long as it takes to create the type of playbook that you were talking about.

Freymann: That's been my experience. I started briefing this stuff around the interagency and on the Hill in 2024 because the House China Select Committee had done this report and they had found the United States . . . they wrote this in the report, quote, “The United States lacks a contingency plan for the economic and financial effects of a conflict with China.”

This is December, 2023. And I read that and I was appalled. I said, “What do mean there was no plan?” Surely somewhere in Treasury, is a plan. No, there's no one office in Treasury that's responsible. Took it around the Hill, briefed it to everyone from the most progressive Dems to the MAGA Republicans. Everyone's like, yeah, of course there should be a plan.

But it's too big. It's no one's job because it's too big. And also it just gets to the difference in approach to military folks versus economic folks. Economists don't do contingency planning. It's not their thing.

So what is the purpose of what I'm doing here? It's an outsider putting something on paper. Well, I think it's helpful to start talking about these things now. We have to start having this conversation now, because in the event, we're going to find out that we don't have a plan, but maybe we'll have what the president once beautifully termed a concept of a plan. The broad outlines or the principles that would describe what it is that we're trying to achieve, what it is that we're trying to avoid, and how we aim to achieve that.

And if we put this down on paper and we start to convene conversations about it among allies, between Democrats and Republicans in an informal way, just say, imagine that our relationship with China turns openly abusive and we decide we have to start getting divorced. And yeah, divorce sucks, divorce is expensive, but divorce is also sometimes necessary and it's an opportunity. And you're imagining life on the other side.

Let's think from a blank sheet of paper. What do we want the global economy to look like as we are divorcing China? If we have the opportunity to rethink or reverse some of these mistakes that we made in the last forty years of outsourcing all these jobs, letting China steal all our IP, and we get to start again, how would we do it? That's an opportunity. And that's potentially something that politicians could sell to the American people to say, listen, we made some mistakes, now we're going to pay for those mistakes. But it's going to work out better in the end.

There's a brighter future at the end of this, where maybe we'll bring more good jobs home that we had lost. Maybe we'll become less vulnerable to coercion. Maybe we'll make a better, safer, more secure and prosperous world. And it's not an easy sell, but then the other options are not that good either. But at least it's something to start from in a crisis. So we're not starting from nothing.

Kahl: I think it's a really important point and maybe one we’ll conclude the conversation on. It’s a the very different context, but the Biden administration spent four months between when the intelligence was coming in that the Russians intended to invade Ukraine and the actual invasion and spent that four months doing an extraordinary amount of interagency work on the day one playbook for what would happen if the invasion actually happens: how the sanctions would be implemented, how we would deal with getting security assistance into Ukraine, how we would deal with the economic fallout.

And we didn't get it all right. I think we didn't do enough on things like food security that ended up being a big problem. But I know how hard it is, even when you have the intelligence that says something really bad is about to happen. The China piece is way harder, both because the problem is bigger and because we aren't going to be compelled by four months of warning, and that may not be enough.

So I think you're clarion a call in the book, which everybody should go read, for that thinking to happen as far in advance as possible and to start talking about it so that China knows that we're thinking about it and therefore hopefully is deterred by the fact that we have a plan.

All right, everybody's supposed to go read your book. But at the end of World Class, we ask all of our guests to name one article that people should go out and read if they want to understand the world.

So do you have a recommendation for our listeners?

Freymann: Yeah, there's a new piece out from Evan Medeiros, former Asia director on the National Security Council. It's called “A New Era of U.S.-China Interaction from Competing to Racing.” And I would urge everyone to read it. It's a very important piece.

Medeiros' argument is that the trade war that escalated in 2025 between the U.S. and China has created a new chapter in U.S.-China relations where essentially the two countries are are racing to de-risk from one another, to reduce their vulnerabilities in case the really acute crisis happens again. And China is thinking much more seriously, and they're working much more aggressively to break those dependencies than we are.

And we need to get serious and recognize what race we're running, otherwise we're going to get caught behind.

Kahl: Well, Eyck, I think that's a great place to end. First of all, thanks for writing such an important book on such an important topic at such an important time. I hope it does well. I hope our listeners go out and check it out. Thanks, Eyck.

Freymann: Thanks, Colin.

Kahl: You've been listening to World Class from the Freeman Spogli Institute for International Studies at Stanford University. If you like what you're hearing, please leave us a review and be sure to subscribe to Apple, Spotify or wherever you get your podcasts to stay up to date on what's happening in the world and why.

How did Taiwan transform itself from an impoverished economy into a titan of computer and semiconductor chip manufacturing, home to industry giants such as Acer, Foxconn, and TSMC?

The history presented in Honghong Tinn's recent book, Island Tinkerers: Innovation and Transformation in the Making of Taiwan’s Computing Industry (MIT Press), demonstrates that Taiwan's successful computing enterprises and manufacturing sectors arose from Taiwanese technologists' engagement in a process of technology transfer involving overlapping acts of imitation, emulation, experimentation, and innovation.

Tinn, a historian of information technology based at the University of Minnesota Twin Cities, discussed her book at a recent seminar hosted by APARC's Taiwan Program. Watch the session recording:

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Challenging the stereotype of "The West innovates, and the East imitates," Tinn traces the development of Taiwan’s computer and semiconductor industry to efforts by Taiwanese hobbyists and enthusiasts who leveraged Cold War-era U.S. technical assistance while simultaneously adapting and modifying imported technology. Through such hands-on tinkering, they deepened their technical understanding, made computing accessible across the island, and built the foundation for domestic manufacturing.

In her seminar presentation, Tinn focused on Chapter 8 of her book, which describes the technological achievements of Acer's founder, Stan Shih, and his engineers, and critiques their portrayal as counterfeiters by U.S. stakeholders. She recounts how, in 1983, Shih's company, originally named Multitech, realized the dream of manufacturing computers domestically and shipped a thousand microcomputers to the United States, only to have them intercepted by U.S. Customs in San Francisco. The computers, called Micro-Professor II, were deemed Apple II counterfeits despite being independently designed with unique features. Although Apple did not file suit against Multitech in Taiwan, it worked intensely to prevent Multitech from exporting its products to the United States.

What followed, Tinn argues, revealed deep misunderstandings, sometimes deliberate, about Taiwan's technological capabilities. U.S. media and analysts failed to make sense of Shih’s success in the microcomputer market, and Congressional hearings in 1983 portrayed Taiwanese computer manufacturers as counterfeiters and invaders threatening American industry.

This misrepresentation, she says, reflected Orientalist assumptions that Taiwanese lacked the capacity to innovate. Tinn writes:

"The Orientalist representations of Taiwanese computer manufacturers can be selfcontradictory. On the one hand, when it comes to the manufacturing capacity of Taiwanese computer makers, participants in the congressional hearings exaggerated the numbers of counterfeit computers Taiwanese companies dumped in the United States. On the other hand, more and more US computer manufacturers gradually recognized the manufacturing capacity of Taiwanese companies and subcontracted them to make computers at lower cost for the expanding US and global personal computer market."

Island Tinkerers is available from MIT Press, including in an open-access edition. 

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At a recent seminar hosted by APARCʼs China Program, Professor Jessica Chen Weiss, the David M. Lampton Professor of China Studies at the Johns Hopkins University's School of Advanced International Studies, presented findings from her forthcoming book, Faultlines: The Tensions Beneath China's Global Ambitions (under contract with Oxford University Press), which examines how domestic politics and regime insecurity shape China’s foreign policy ambitions, prospects for peaceful coexistence, and the future of international order. Drawing on research and fieldwork in China, Weiss argued that understanding Beijingʼs behavior on the world stage requires looking beyond ideology to the contested priorities and political calculations that drive decision-making within the Chinese Communist Party (CCP).

Weiss proposed a framework centered on three pillars that have sustained CCP legitimacy since the late 1970s: sovereignty (nationalism), security (civility), and development. Her analysis reveals that China's objectives are not static but moving targets shaped by competing domestic interests, leadership priorities, and international pressures.

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The Sovereignty-Security-Development Paradigm
 

At the heart of Weissʼs argument is the recognition that the CCPʼs foremost concern is domestic survival. In the face of the collapse of most communist regimes, the Party has remained vigilant against what it calls “peaceful evolution” and democratic contagion.

On issues touching core sovereignty concerns – Taiwan, Hong Kong, and maritime territorial claims – China has been “hyperactive” in making demands, even when doing so invites international censure. Weiss explained that the more central an issue is to CCP domestic legitimacy, the harder it becomes to make concessions, and the more likely international pressure is to backfire.

Yet tensions exist between competing priorities. China has compromised on certain border disputes to shore up domestic security, while its evolving stance on climate change reflects a shift from viewing carbon limits as threats to growth to recognizing the greater threat environmental catastrophes present to the nation’s stability.

Beyond the Monolith: China's Internal Contestation
 

Weissʼs research demonstrates that authoritarian China is far from monolithic. Different geographic, economic, institutional, and even ideological interests shape policy debates, even if most actors lack formal veto power. Local governments can resist central directives, as evidenced during the COVID-19 outbreak, when local officials initially withheld information about human-to-human transmission from the central government to prevent panic from disrupting important political meetings.

This pattern of center-local tension extends to China's international commitments. Local officials often game environmental regulations to juice growth and secure promotions, undermining Beijingʼs pledges on carbon emissions. On issues ranging from Belt and Road investments to export controls, implementation frequently diverges from stated policy as local actors pursue their own interests.

Weiss’s framework distinguishes among issues that are both central and uncontested (such as Taiwan), those that are central but contested (like climate change and trade policy), and peripheral issues where Beijing has shown greater flexibility (such as demonstrated by many UN peacekeeping initiatives). This helps explain why international pressure succeeds in some domains but fails spectacularly in others.

"The more central an issue is domestically, the more pressure the government faces to perform, and the harder it is to defy these domestic expectations," Weiss said. As a result, international pressure on these central issues is more likely to backfire, forcing the government to be seen as defending its core interests. She underscored that "even on these central issues, there's often tension with other central priorities, and managing these trade-offs comes with a number of different risks. It also means that sometimes an issue that touches on one pillar of regime support can yield to another."

Nationalism as Constraint and Tool
 

Weiss described nationalism as both a pillar of the CCPʼs legitimacy and a potential vulnerability when the government’s response appears weak. While large-scale anti-foreign protests have become rare, nationalist sentiment remains active online and shapes diplomatic calculations.

During Speaker Nancy Pelosiʼs 2022 visit to Taiwan, Chinese social media erupted with calls for the PLA to shoot down her plane. One interlocutor told Weiss his 14-year-old son and friends had stayed up past bedtime to watch Pelosiʼs plane land, illustrating nationalismʼs penetration into Chinese society.

Survey research reveals Chinese public opinion is quite hawkish, with majorities supporting military spending and viewing the U.S. presence in Asia as a threat. The government often refrains from suppressing nationalist sentiment to avoid backlash, even when doing so creates diplomatic complications. Weissʼs public opinion survey experiments, however, reveal that tough but vague threats can provide the government with wiggle room for de-escalation, although disapproval emerges when action is not sufficiently tough.

Regime Security Without Ideological Crusade
 

Weiss pushed back against arguments that China is bent on global domination or that ideology drives conflict with the West. While the CCP seeks a less ideologically threatening environment, it must balance this against development and market access.

This pragmatic calculus explains China's constrained support for Russiaʼs war in Ukraine — Beijing fears secondary sanctions more than it values autocratic solidarity. Rather than exporting revolution, China has worked with incumbents of all political stripes in the service of its national interests.

Chinaʼs strategy focuses on making autocracy viable at home, not on defeating democracy globally. This suggests room for coexistence if both sides can reach a détente on interference in internal affairs.

“China's activities are making autocracy more viable and, to the extent that China is succeeding, making China's example more appealing as a consequence. But its strategy doesn't hinge on defeating democracy around the world,” argued Weiss. This implies, to her view, that “there is more room for coexistence between autocracies and democracies if these different systems can find or reach a potential détente in the realm of ideas about how countries govern themselves, and importantly, they need to pull back their efforts in other societies across boundaries.”

Interdependence and Future Trajectories
 

Weiss concluded by outlining how her framework suggests different engagement strategies depending on where issues fall within the centrality-contestation matrix. On central but uncontested issues like Taiwan, pressure proves counterproductive, and reciprocal restraint may be most promising. On central but contested issues like currency, multilateral pressure can influence certain Chinese constituencies against others. On peripheral issues, such pressure is most effective unless powerful domestic constituencies subvert implementation.

Addressing questions about U.S.-China decoupling, Weiss noted that both sides recognize there are interdependencies that don’t have quick solutions. Even in a critical area like minerals, diversification will take at least a decade, and Chinese processing will still dominate globally. The goal of diversification should be to preempt coercion, not to achieve true decoupling.

The January 3, 2026, U.S. “Operation Absolute Resolve” in Venezuela to capture and remove President Nicolás Maduro has raised urgent questions about its repercussions for the U.S.-China competition, Taiwan Strait security, American strategic priorities in the Indo-Pacific region, and U.S. allies and partners.

In two new episodes of the APARC Briefing series, Stanford scholars Larry Diamond, the Mosbacher Senior Fellow in Democracy at the Freeman Spogli Institute for International Studies (FSI) and William L. Clayton Senior Fellow at the Hoover Institution, and APARC faculty affiliate Oriana Skylar Mastro, a center fellow at FSI, join host Kiyoteru Tsutsui, the director of APARC, to unravel what happened in Venezuela and the implications of the U.S. actions in Latin America for Taiwan, security and alliances in the Indo-Pacific, and U.S. relations with stakeholders in the region.

Both scholars agree that the U.S. mission in Venezuela is a precedent that likely emboldens rather than deters China in its Taiwan calculus, warning that the shift it represents in U.S. national security policy might detract from American capabilities in the Indo-Pacific region at a crucial moment. They also provide sobering advice for U.S. allies struggling to adjust to rapidly shifting geopolitical realities under the second Trump administration.

A Shocking Action in World Affairs

There is no dispute that the Maduro government has been deeply authoritarian, deeply corrupt, and deeply illegitimate, says Diamond, author of Ill Winds: Saving Democracy from Russian Rage, Chinese Ambition, and American Complacency. Yet the United States “has probably violated international law to intervene forcibly in the internal affairs of Venezuela and remove its political leader," creating enormous implications for the international community. If it does not pursue a strategy of systemic democratic change in Venezuela, “all of this will have been for naught, and it will have paid a tragic price in terms of international precedent and international legitimacy,” Diamond argues.

Beijing is already using the operation as a "discourse power win," depicting the United States as crushing sovereignty and international law, Mastro notes. Moreover, in addition to Venezuela, President Trump continues to make statements about Greenland, reiterating its importance for U.S. national security and his interest in acquiring the territory, which has alarmed European partners and exacerbated strains with NATO.

“For the first time since WWII, some European countries have declared the United States to be a security threat,” Mastro says. “So I am curious to see if the Chinese try to bring along the Venezuela case as well, to convince U.S. allies and partners to distance themselves from the United States, which would have significant repercussions for the global order and for the United States' role in it.”

A Risky Strategic Reorientation

By unilaterally bypassing international norms to wield power in its own "backyard," the United States may have set a precedent that China can now exploit to justify its own ambitions in Taiwan as a legitimate exercise of regional dominance.

Diamond remarks on this line of thought: “If the United States, as a hegemon, can just do what it wants to arrest and remove a leader, in its kind of declared sphere of influence, what's to stop Xi Jinping from doing the same in his sphere of influence, and with a democratic system in Taiwan, whose sovereignty he does not recognize?” 

On the other hand, many commentators have argued that Operation Absolute Resolve serves as a deterrent to Chinese aggression. Granted, there is no doubt that the operation was a remarkably successful military attack showcasing the capabilities of U.S. special forces, notes Mastro, who, alongside her academic career, also serves in the United States Air Force Reserve, for which she currently works at the Pentagon as deputy director of research for Global China Strategy. Nevertheless, she emphasizes that the United States cannot carry out a similar attack in Asia.

“There is no situation in which we ‘neutralize’ Chinese air defenses and then somehow do some sort of infiltration,” says Mastro, author of Upstart: How China Became a Great Power. The U.S. intervention in Venezuela, therefore, “does not tell us a lot, operationally, about what the United States is capable of in a contingency via China.”

More troubling, Mastro identifies the Venezuela operation as demonstrating a fundamental shift in U.S. strategic priorities, with the raid conducted just weeks after the Trump administration released its 2025 National Security Strategy, which prioritizes restoring “American preeminence in the Western Hemisphere.” Mastro characterizes it as “the one region where U.S. dominance faces no serious challenge.” Thus, Venezuela suggests “the Trump administration means business about the renewed focus on the Western Hemisphere, and, unfortunately, that makes me concerned that there might be strategic neglect of the Indo-Pacific moving forward,” she points out.

Diamond stresses that, virtually throughout the entire presidency of Xi Jinping, dating back to 2012, China has been rapidly building up its military capabilities, prioritizing those specifically suited for coercing, isolating, or potentially seizing Taiwan. Against this backdrop, “I am much more fearful about the future of Taiwan in the week following U.S. military action on January 3 in Venezuela than I was before that action.” 

Mastro agrees with this assessment about the ripple effects of the operation in Venezuela. “I would say that it probably emboldens China.”

Frank Advice for U.S. Allies

For U.S. allies in the Indo-Pacific, including Japan, South Korea, the Philippines, and Australia, as well as allies and partners in Europe, both scholars offer pragmatic counsel for coping with the Trump administration.

Diamond urges U.S. allies to manage Trump diplomatically while staying focused on core interests, namely, prioritizing the preservation of the alliances and strengthening autonomous defense capabilities to demonstrate commitment and hedge against potential U.S. retrenchment.

“It takes constant, energetic, proactive, imaginative, relentless, and in some ways deferential working of the relationship, including the personal relationship between these leaders and Donald Trump [...] The future will be better if the leaders of these countries internalize that fundamental lesson about Trump.”

Mastro is equally direct about the limited alternatives ahead of U.S. allies: "You don't really have an option. That Chinese military – if it gives the United States problems, it definitely gives you problems. There's no hope for a country like Taiwan without the United States. There's no hope for Australia without the United States."

Counterintuitively, U.S. assertiveness may indicate its insecurity about the balance of power with China. “It seems to me that the United States also needs to be reassured that our allies and partners support us [...] And if we had that confidence, maybe the United States would be less aggressive in its use of military force.”

Watch the two APARC Briefing episodes:

🔸 What the U.S. Raid in Venezuela Means for Taiwan and Asia - with Larry Diamond >

🔸 Does Venezuela Provide China a Roadmap for Taiwan? – with Oriana Skylar Mastro >

At a seminar hosted by APARC’s Taiwan Program, National Chengchi University’s Hsiao-Hui Lee, a professor of management information systems, dissected how global trade shocks propagate not only through trade flows of physical goods but also through financial flows, particularly trade credit, within supply chain networks. Against the backdrop of shifting U.S. trade policies and geopolitical upheavals, Lee's research offers insights for policymakers and businesses navigating the complex landscape of global trade and supply chain resilience. Through a Taiwan lens, her analysis underscores the importance of managing not just the logistical but also the financial linkages of global supply chain networks.

Global trade is interconnected through global supply chains via direct and indirect trade. Geopolitical events, natural disasters, and unexpected shocks disrupt these connections, creating ripple effects across global supply chain networks. Events ranging from the 2008 financial crisis to the 2011 East Japan earthquake and tsunami, the COVID-19 pandemic, and, more recently, U.S.-China trade tensions, the Russia-Ukraine war, and the Trump administration’s executive orders all accentuated vulnerabilities within these interconnected frameworks.

Lee’s main point is that shocks in an industry or a region can propagate across supply chains not only through transactions but also via the movement of trade credit, which allows firms to buy inventory and delay payments. For suppliers, this mechanism provides a financial buffer that helps maintain liquidity and manage cash flows. Indeed, trade finance supports 80 to 90 percent of global trade, according to the World Trade Organization.

Yet, trade credit comes with its own set of risks that may amplify financial stress across supply chain networks and propagate shocks. And if one firm defaults, then the impact can cascade through the supply chain, affecting multiple sectors. Trade creditors experience substantial losses when debtors fail, and these losses can increase the bankruptcy risk for suppliers, demonstrating how financial stress can spread through trade credit links. For example, during the 2008 financial crisis, a significant contraction in trade finance availability led to a 12% decline in international trade. This shortage of financing disrupted global supply chains, causing widespread economic contraction. 

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Political leaders aiming to secure supply chains have touted risk-mitigating strategies such as reshoring (repatriating raw material production and manufacturing), nearshoring (moving far-flung sourcing points to closer countries and regions), and friendshoring (relocating supply chains to allied countries where the risk of disruption from political chaos is low). Each strategy offers unique potential benefits, like reduced transportation costs or enhanced political stability. For instance, the U.S. CHIPS Act aims to bolster domestic semiconductor manufacturing, while the United States-Mexico-Canada Agreement (USMCA) helped facilitate duty-free access to U.S. markets.

Lee’s research, however, is a cautionary examination of the trade credit interdependence inherent in these common outsourcing strategies and their influence on shock propagation. She argues that, while relocating production closer to home or to friendly nations is beneficial, the politics of relocation often overlook the financial linkage risks introduced by extensive trade credit networks. Taiwan’s manufacturing ecosystem – concentrated around semiconductors, electronics, and precision components – is particularly illustrative of this complexity, with high levels of inter-firm trade credit amplifying liquidity stresses during trade shocks.

Using empirical models, Lee’s analysis shows that in-country shock propagation tends to be stronger than cross-border transmission. Yet, the intricate web of cross-border trade credits means that even with reshoring or nearshoring strategies, Taiwanese suppliers, for example, remain financially interlinked with foreign customers, like Apple and Nvidia. Therefore, demand shocks in one region may still create repercussions in Taiwan's local cash flow chains.

Lee suggests that implementing robust risk management practices – such as credit insurance, diversification of credit sources, and realignment of supply chains – can help mitigate these risks.
 

Key Takeaways: Global Trade and Credit-Driven Co-Movement

For Global Stakeholders:
 

1. The Importance of Credit Chain Interdependence: Trade credit chain linkage risks can propagate global trade shocks.
2. Pros and Cons of Outsourcing Strategies: While reshoring, nearshoring, and friendshoring have clear benefits, each also presents unique challenges and risks, particularly due to trade-credit interdependencies.
3. Complexity in Trade-Credit Networks: Extensive trade credit links represent an often-overlooked risk in corporate relocation decisions.
4. Supply Chain Resilience Strategies: Supply chain resilience requires managing not only logistics but also financing networks.

For Taiwan:
 

1. Taiwan’s Manufacturing Ecosystem Dynamics: The island nation’s manufacturing sectors heavily depend on inter-firm trade credit networks, which can amplify liquidity stresses during shocks.
2. Financial Ties Remain Despite Reshoring Efforts: Even with U.S. reshoring or nearshoring efforts, Taiwanese suppliers remain financially tied to foreign customers, making them susceptible to demand shocks abroad.
3. Financial Flexibility for Stability: Firms such as TSMC, Hon Hai, and Delta Electronics leverage factoring and receivables sales to stabilize working capital, indicating that financial flexibility is key to resilience.
4. Enhancing Economic Fortitude: Expanding supply-chain finance platforms and trade-credit insurance could boost Taiwan’s resilience amid export bans or geopolitical disruptions.