The day supply chains stood still: What war with China could bring

Recent events continue to spotlight supply chain weaponization’s potency, and increasingly central role in a global landscape dominated by great power competition. Manipulation of key wheat and energy arteries in Ukraine, medical stockpile consolidation during COVID, and the ongoing tightening of U.S.-China export controls all illustrate nation-states seeking to leverage chokepoints in an interconnected global market to project power and advance key security objectives.

Companies and countries caught in the crosshairs are reeling, becoming increasingly attuned to the dangers of overreliance on any one particular commodity, company, country, technology or resource. Despite these disruptions, the global economy thus far has managed to avert widespread financial crises, even with ballooning spending, rising inflation and slowing growth. 

Yet, an even larger challenge looms: the fear of a war between the United States and China, the most influential hegemons and world’s two largest economies.

While many have gamed how a conflict might materialize on the battlefield, surveying the disastrous impacts to the homeland and the masses within it is not widely known. This includes the food we buy, the cars we drive, the prescriptions we take, and the energy we use, which would dwarf recent shortages in the United States for cars and baby formula, for example.

Given the self-harm of an expanded or full-scale embargo of Chinese goods destined for the U.S., some have downplayed such a scenario by Chinese leader Xi Jinping as impractical or unlikely. Those skeptics should recall similar flawed assumptions made on the eve of Vladimir Putin’s invasion of Ukraine, which evidenced autocrats’ willingness to manipulate key commodity flows, at times at great financial cost, to advance great power ambitions.

Should an entanglement occur, it is likely that exploiting supply chain dependencies, already partly levied in the technology and investment sectors, could feature and expand in other critical sectors to further levy costs and attempt to curb each countries’ strategic goals. 

While the scope, scale and evolution of a hot conflict are difficult to forecast, disruption for the U.S. companies and domestic consumers would be acute and far-reaching, including in three important sectors: medicine and pharmaceuticals, microchips and technology, and energy.  

In the medical and pharmaceutical sectors, curtailments in supplies sourced or produced in China would severely degrade health care access, quality and treatment for nearly every American. Beijing’s chokehold on advanced pharmaceutical ingredients (API), key precursor materials, as well as global production of critical generic medications is sobering. For example, approximately 70 percent of acetaminophen in the U.S. is made in China, as well as 80 percent of heparin global supply, a blood anticoagulant. Even more worrying, the Food and Drug Administration (FDA) cannot accurately pinpoint the true origins of commonly sourced medications, which many estimate at 70-90 percent from China. The U.S. has not produced basic medications, including penicillin, since 2004. 

Interruptions by Beijing could empty U.S. pharmaceutical shelves, crippling our health care system and crippling previously routine treatments. Even medical imports from India, another key U.S. supplier who relies heavily on APIs from Beijing, would experience significant curtailment following likely pressure from Beijing.  

Access to semiconductor chips, needed to operate our cars, mobile devices, kitchen appliances, and televisions, and to conduct personal commerce and banking, would suffer considerable paralysis, with mass shortages hitting all population segments in virtually all sectors. This would halt the “smart” internet-enabled device revolution, hampering all aspects of manufacturing and technology underpinning the U.S. economy and its security. The nation’s innovation engine, including formidable advancements in robotics and artificial intelligence, an arena where America derives tremendous strength, is also heavily predicated on affordable chip access.  

From the lens of geographical production concentration, the metrics are sobering. A blockade of Taiwan could deprive Washington of 20 percent of all global chip access and 90 percent in the specialized chip production space. This would likely be enough to break Western resolve against China’s land-grab. If conflict expanded to additional Indo-Pacific rings, including Japan and South Korea, the U.S. would see a 75 percent reduction in global chip access. 

Although well-intentioned, efforts to revitalize domestic chip manufacturing could prove futile. For example, TSMC’s recently constructed plant in Arizona is expected to have capacity to produce 600,000 chips per year. Yet, Taiwan’s chip production capacity is near 13 million, further compounded by forecasts that chip demand is expected to double by 2030. 

Lastly, the world’s energy modernization efforts, an area Beijing has effectively cornered, would also come to a crashing halt. This is particularly problematic in the electronic vehicle (EV) battery, solar panel, and wind turbine production market-share. Estimates indicate that Beijing possesses over 80 percent of the world’s cathode manufacturing capacity, 75 percent of its cobalt refining capacity, and 60 percent of its lithium processing. To showcase this dependency in historically sobering terms, OPEC controlled 30 percent of global oil supply at its peak.

These assessments fail to mention the enormously consequential sectors that also would suffer disrepair, including defense, telecommunications, software, agriculture, biotech, steel and textiles, among others. 

Some may conclude that these commodity vulnerabilities should reinforce an approach of conflict-avoidance with Beijing. While we must not overtly seek hostility, Beijing’s ongoing manipulation of the free market — including chokehold on the critical supplies that we, as consumers, rely on for our health, security and quality of life — cannot occur at our expense, unchecked. 

The past two administrations have made strides in outlining and levying initiatives to begin limiting our risk exposure to a growing China threat. However, the seriousness of the threat must be reframed clearly and directly to the American people. This a vector that not only challenges the U.S. architected world order, potentially 7,000 miles from our shores, but one that, if realized, could upend our way of life and security, more than any bullet or battalion.  

Adam Stahl is a national security professional with stints at the Senate Commerce and Foreign Relations committees and the Department of Homeland Security. A former deputy chief of staff in the Department of Homeland Security Office of Strategy, Policy and Plans, he led the development of the department’s China and Arctic strategies. He now works for an energy company.