The defense of Taiwan in the event of an attempted Chinese takeover using force is an issue that now occupies centerstage. Its protection, either by distributed assets or by larger conventional assets, would present the United States with problems in fielding capabilities, as well as for their subsequent support. It would entail a long logistics train, a sizable part of which would pass through contested areas. The closer their location to mainland China, the greater the opposition. Given the technological prowess of U.S. industry, success might still be attained, but it would be a costly venture. It is therefore worth considering whether there are any low-cost options for deterring China from using force to subsume Taiwan. One means would be using the threat of trade denial. The United States should consider the broad parameters of such a strategy.
Trade Denial
China is the world’s largest trading nation. In 2022, China’s merchandise trade was 35.13 percent of its gross domestic product (GDP). For a 2022 GDP of 17.963 trillion U.S. dollars (USD), that roughly amounts to a staggering 6.3 trillion USD. Unhindered continuation of this trade is an existential issue for China. This is all the truer given the unstated bargain the Communist Party of China has struck with its own people—an assurance of sustained improvement in living standards in return for noninterference in the country’s political process.
China relies heavily on sea lines of communication to sustain its trade. Various Belt and Road Initiative schemes that improve road and rail connectivity aim to reduce this dependency, but most merchandise still transit by sea. While China may be able to safeguard its shipping up to the second island chain in the event of hostilities, its ability to do so beyond that point is miniscule. China has many naval assets, but it does not have the bases or the afloat support to ensure their sustenance at distant locations. The ability to do so on a global scale rests only with the United States. As articulated by George Friedman in his book, The Next Hundred Years: A Forecast for the 21st Century: “The fact that the United States emerged from World War II with not only the world’s largest navy, but with naval bases scattered around the world, changed the way things worked. Any seagoing vessel—commercial or military, from the Persian Gulf to the South China Sea to the Caribbean—could be monitored by the United States Navy, who could choose to watch it, stop it or sink it.” He goes on to write, “This highlights the single most geopolitical fact in the world: the United States controls all of the oceans. No other power in history has been able to do this. . . . No one goes anywhere on the sea if the United States does not approve.”1
What would be the mechanics of a strategy involving trade denial? In today’s world, for a state to engage in activities that mirror the unrestricted submarine warfare campaign of World War II is infeasible. It would go against the very tenets of the laws of armed conflict and would lead to an environmental disaster. Even though the Houthis have targeted merchant ships using kinetic weapons, they do so as a nonstate actor with little motivation to comply with international law. Further, the international shipping industry has acquired a truly global character. Ships today are often owned, financed, registered, insured, and underwritten by different entities in different nations. Ownership of their cargo could rest with one or more individuals, companies, or nations. Their crews could be made up of nationalities that are in no way related to any of the factors previously mentioned.
How, then, can a trade denial campaign be conducted? Insofar as ownership of a ship is concerned, the ultimate arbitrator is the country in which the vessel has been registered, i.e. the flag state. Nations try to maintain an adequate number of ships under their own flags for strategic reasons, even if there is a cost associated with such a policy. The United States is no exception. The Jones Act, which refers to Section 27 of the Merchant Marine Act of 1920, requires that vessels transporting cargo from one U.S. point to another U.S. point be U.S.-built and owned and crewed by U.S. citizens. China has similarly invested in its own shipping fleet over the years. In September 2023, the Chinese-flagged fleet at 249.2 million gross tons surpassed Greece to occupy the number one position globally. While China may have ensured it could retain the ability to trade under a sanctions regime that impedes the use of foreign-flagged vessels, the scheme has opened a fresh vulnerability—these vessels could be impounded or commandeered and used as war indemnity in times of conflict.
The intention of trade denial is not to create blockade, which aims to achieve geopolitical goals through economic strangulation and commodity denial. Given its large resources and strategic reserves, China would be able to outlast several months of such activity. Rather, the purpose is to create an enduring economic shock of such dimensions that China would be unwilling to pay the price for its actions.
In a future conflict, the methodology should be clear. All Chinese-flagged vessels in U.S. or allied ports would be impounded. The crews could be repatriated to their respective countries. Vessels in the harbors of non-allied countries, or allied countries unable to comply with U.S. demands, would be commandeered as and when they exited the harbor and enter international waters. A calibrated amount of force may be used against vessels that failed to comply. Going by the practice merchant ship crews have adopted against Somali pirates—essentially locking themselves in a strong room and waiting for assistance to arrive—the probability of resistance against a government-owned gray or white hull would be low. To ensure against leakage that may be caused by reflagging vessels, determination of ownership could be frozen at a designated date, such as the outbreak of hostilities. Further, such measures could be extended to even those vessels flying a flag of convenience, if ownership were confirmed to be Chinese. The bottom line would be to eliminate China’s ability to use the seas as a medium of trade outside the second island chain. Further, China would be confronted with the possibility of losing a sizable part of its oceangoing fleet, possibly on a permanent basis.
Given the highly interconnected world we live in, the repercussions of this trade denial would be felt globally. However, in conflict, the measure of effectiveness of any strategy is determined not by absolute pain, but pain inflicted in relative terms. Thus, while most nations should be able to grit and endure the disruption, for China it would be devastating. The decimation of a sizable part of its GDP, buildup of huge inventories in almost every industry, and large-scale retrenching of labor—all coupled with economic sanctions—would create a social tinder box that even government-fueled nationalism and patriotism would find difficult to counter.
Strategic Advantages
The advantages of adopting such a strategy are several. First, to a large extent, the capability to implement it already exist within the navies and coast guards of the United States and its allies. Where deficient, requisitioning or chartering vessels from other government agencies or private entities could be considered. Such vessels would need to embark a contingent from the Navy, Marine Corps, Coast Guard, or allies for boarding and commandeering operations. Second, China’s ability to counter it is weak and likely to remain so for at least the next couple of decades. For all its recent force accretion, the People’s Liberation Army Navy is still a long way from being able to project power on a sustained basis globally. Third, the measures advocated are essentially non-kinetic and do not risk large scale loss of lives and destruction of capital. Fourth, the Russia-Ukraine conflict has demonstrated the complexities involved in implementing sanctions. A far more effective means of economic isolation is to take away the means of trade itself.
Mainstreaming discussions on adopting a strategy based on trade denial has the potential to enhance deterrence and compel China to adopt a stance vis-à-vis Taiwan that is more aligned to perpetuating the status quo. This opens a window of a few decades in which one hopes leaders will have the wisdom and tenacity to find an enduring solution to a vexed problem.
