Trade as a Shield: How Tariffs and Export Controls Safeguard National Security

Category: Tariffs & Trade | Boncopia.com

In today’s interconnected world, trade isn’t just about economics—it’s a battleground for national security. From semiconductors to critical minerals, the goods flowing across borders can either strengthen a nation’s resilience or expose it to vulnerabilities. As global supply chains grow more complex, countries like the United States are wielding tariffs and export controls to protect their interests, counter economic coercion, and secure critical industries. But how do these tools work, and what do they mean for businesses, consumers, and global stability? Let’s dive into the intersection of trade and national security, exploring how tariffs and export controls are reshaping the landscape.

The Nexus of Trade and National Security

Trade has always been a cornerstone of economic prosperity, but it’s increasingly a matter of national security. The COVID-19 pandemic, geopolitical tensions, and disruptions like China’s export bans on rare earth metals have exposed the fragility of global supply chains. When a single country controls a choke point—like China’s dominance in critical minerals or semiconductors—it can weaponize that control, using economic coercion to influence geopolitical outcomes. For instance, China’s 2024 ban on gallium, germanium, and antimony exports to the U.S. highlighted how adversaries can exploit supply chain dependencies to pressure other nations.

The U.S. has responded by viewing trade policy through a security lens. The Biden and Trump administrations have both emphasized “economic security” as inseparable from national defense, with policies aimed at reducing reliance on foreign suppliers and bolstering domestic industries. This shift reflects a broader reality: trade dependencies can create vulnerabilities that adversaries might exploit, threatening not just economic stability but military readiness and technological leadership.

Supply Chain Vulnerabilities: A Wake-Up Call

Global supply chains are marvels of efficiency but also points of fragility. The 2020 pandemic revealed how overreliance on single-source suppliers—especially in critical sectors like medical equipment and semiconductors—can cripple economies. For example, during the height of COVID-19, shortages of personal protective equipment (PPE) underscored the risks of depending on foreign production. Similarly, disruptions from natural disasters, like the 2011 Japan earthquake, or geopolitical moves, like Russia’s grain export blocks, show how quickly supply chains can falter.

Critical minerals, essential for everything from fighter jets to electric vehicle batteries, are a prime example. The U.S. relies heavily on China for processed rare earths, with over 90% of certain minerals coming from Chinese suppliers. This dependency leaves the U.S. vulnerable to price manipulation or export restrictions, as seen when China halted shipments of heavy rare earth metals in 2024, impacting industries from aerospace to semiconductors. Such moves aren’t just economic—they’re strategic, designed to exert geopolitical leverage.

Economic Coercion: The New Geopolitical Weapon

Economic coercion occurs when a nation uses trade or investment restrictions to pressure another into policy changes. China has mastered this tactic, targeting countries like Australia, Japan, and South Korea with export bans or trade restrictions to influence their political decisions. For example, when Lithuania deepened ties with Taiwan, China restricted its exports, demonstrating how trade can be weaponized.

The U.S. isn’t immune to these tactics but is also a player in this game. By imposing tariffs or sanctions, the U.S. seeks to counter coercion and protect its interests. However, overuse of these tools risks alienating allies or escalating trade wars, as seen with recent tariffs on Canada and Mexico, which raised costs for U.S. consumers and strained alliances critical for countering China’s influence.

Tariffs: A Double-Edged Sword for National Security

Tariffs are a blunt but powerful tool for protecting national security. By increasing the cost of imports, they incentivize domestic production and reduce reliance on foreign suppliers. The Trump administration’s 2025 tariffs—25% on Canada and Mexico, 10% on China, and up to 245% on specific Chinese goods—aim to address trade imbalances, curb illegal immigration, and combat the fentanyl crisis. These measures also protect industries like steel and aluminum, vital for defense, by imposing 25% tariffs to bolster U.S. production.

Impact on Industries: Tariffs have shielded U.S. manufacturing, with steel output rising 22% and 45,000 jobs added since 2020. However, they’ve also raised costs for consumers, with estimates suggesting an extra $1,277 per household annually. Industries like automotive, reliant on cross-border supply chains, face disruptions, as 30% of a car’s value from Mexico often comes from U.S. parts.

Global Reactions: Over 75 countries have initiated trade talks to avoid U.S. tariffs, but retaliatory measures are brewing. The EU’s Anti-Coercion Instrument (ACI), enacted in 2023, allows it to impose tariffs or restrict U.S. firms in response to perceived economic coercion. This tit-for-tat risks escalating into broader trade conflicts, potentially undermining global economic stability.

Strategic Goals: Tariffs aim to rebuild U.S. industrial capacity, especially in defense-critical sectors. The White House argues that persistent trade deficits have eroded manufacturing, compromising military readiness. By encouraging domestic production, tariffs seek to create a resilient ecosystem for advanced technologies like bio-manufacturing and microelectronics.

Export Controls: Guarding the Technological Edge

Export controls are a more targeted tool, restricting the flow of sensitive technologies to adversaries. The U.S. has expanded these controls to protect national security, particularly in semiconductors and AI. In 2022 and 2023, the Bureau of Industry and Security (BIS) tightened rules to limit China’s access to advanced chips and manufacturing equipment, citing risks to U.S. military capabilities. These measures aim to maintain America’s technological edge, as chips power everything from missiles to AI systems.

Why It Matters: China’s Military-Civil Fusion (MCF) strategy integrates commercial tech into military applications, making export controls critical. By restricting U.S. firms and citizens from supporting China’s semiconductor industry, the U.S. seeks to slow its adversary’s technological advancements.

Challenges: Export controls can backfire. Unilateral restrictions may push allies to develop alternative supply chains, reducing U.S. influence. They also risk “design-out” threats, where adversaries innovate around restrictions, as China has done by boosting domestic chip production. Multilateral cooperation, like the Wassenaar Arrangement, is crucial but often slow to adapt to modern challenges.

Economic Impact: While protecting national security, export controls disrupt global trade. Companies like Apple have shifted production to Vietnam to avoid restrictions, but this raises costs and complicates supply chains. The tech sector, a key driver of U.S. innovation, faces uncertainty as allies like the EU impose their own controls, such as tariffs on Chinese electric vehicles.

Balancing Act: Security vs. Economic Costs

The use of tariffs and export controls reflects a delicate balance. On one hand, they protect critical industries and reduce vulnerabilities; on the other, they increase costs, strain alliances, and risk retaliation. The CSIS highlights an “economic security trilemma”: the U.S. can pursue two goals—promoting domestic industries and protecting technologies—but not without sacrificing deeper integration with allies.

For businesses, this means navigating a volatile landscape. Supply chain diversification, tariff engineering, and compliance with regulations are now critical. For consumers, higher prices are a reality, with long-term GDP impacts projected at 0.9% by 2027 if tariffs persist. For policymakers, the challenge is using these tools judiciously to avoid diminishing their effectiveness, as overuse can lead to “bacterial resistance” where countries reduce exposure to U.S. markets.

The Road Ahead

The intersection of trade and national security is reshaping global commerce. Tariffs and export controls are powerful tools, but they come with trade-offs. The U.S. must balance protecting its interests with maintaining alliances and fostering innovation. As nations like China and the EU flex their own economic muscles, the risk of trade wars looms large. Businesses must adapt, consumers must brace for costs, and policymakers must tread carefully to ensure trade remains a shield, not a sword.

Thought Questions:

1. How can the U.S. balance tariffs and export controls to protect national security without alienating key allies like Canada and the EU?

2. Are tariffs an effective long-term strategy for reducing supply chain vulnerabilities, or do they risk escalating global trade tensions?

3. How should businesses adapt to the increasing use of economic coercion in global trade?

Sources: Information drawn from web sources and posts on X, including whitehouse.gov, csis.org, morganlewis.com, and others, as cited.