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Editor’s note: This article is the sixth in an 11-part series examining how the United States should organize, lead, and integrate economic statecraft into strategy, defense practice, and the broader national security ecosystem. This special series is brought to you by the Potomac Institute for Policy Studies and War on the Rocks. Prior installments can be found at the War by Other Ledgers page.
The next major war the United States fights could be decided by supply chains long before the first shot is fired. That reality is already taking shape, as adversaries use export controls, sanctions, and supply chain leverage to shape outcomes on the battlefield.
The Russo-Ukrainian War typifies this development: China has enacted strict export restrictions on drones and drone parts bound for Ukraine, directly degrading its military capability. In response, Ukraine has developed a China-free drone, though cost pressures continue to drive reliance on Chinese components.
This is not an isolated case. Sanctions that specifically target military technology have grown more prominent in recent years. The United States and its allies have imposed export controls on China for advanced semiconductor chips and the tools made to produce them. China, in turn, has restricted rare earth sales to firms working with the Pentagon — putting nearly a third of defense procurement programs at risk of shortages. These examples show that economics has become an “operational domain of warfare.”
U.S. military doctrine has yet to catch up. Incorporating economic tools of statecraft into operational planning will require greater technological sophistication to assess mission risk, novel mitigation strategies, and deeper cooperation between the private sector and the defense enterprise. These efforts should be housed in a dedicated entity within the Pentagon — such as the proposed Economic Warfare Operations Capability — tasked with identifying, orchestrating, and addressing fundamental risks to the industrial base and supply chains, while coordinating the interagency cooperation those missions demand. There is a need to build greater trust between the private sector and the Pentagon and to teach defense leaders economic statecraft skills.
Economic statecraft lives primarily in the private sector. While the U.S. government sets the rules governing economic coercion, corporations execute the actions — and they answer to shareholders, not combatant commanders. Operationalizing economic statecraft, therefore, requires the Pentagon to cultivate closer private sector relationships and structure incentives that allow companies to profit while advancing national security objectives.
The Pentagon has already launched initiatives toward this end — the Economic Defense Unit, the Office of Strategic Capital, and the Defense Innovation Unit, among them. What is missing is an integrating body that aligns these efforts toward common objectives. That is precisely the role the Economic Warfare Operations Capability could play.
Among the most acute risks to military operations is supply chain disruption. When an adversary controls the sole source of a critical component, it gains leverage over battlefield readiness without firing a shot. Tactics such as the deliberate “delaying, diverting, or destroying of an adversary’s supply lines” are becoming integral to modern warfare.
Vulnerabilities originate from the defense industry’s multi-tiered structure, particularly for third-tier supplies and below. It is at these levels where problems, such as single sourcing, geographical concentration, and adversary origination, are typically found. Successive U.S. administrations have recognized the importance of supply chain resilience in the abstract. Yet, the Pentagon has not translated that recognition into operational planning tools that commanders can actually use.
That starts with visibility. The Pentagon cannot identify adversary chokeholds without detailed supply chain data from its contractors. However, few corporations know their full supply chain, particularly at the third-tier supplier level and below. Recent surveys show that although 60 percent of firms report comprehensive visibility into tier-one suppliers, only 30 percent report visibility further downstream, while just 17.1 percent analyze critical suppliers down to tier 4 and beyond. Suppliers are often reluctant to share this information for fear of competitive exposure. In short, there are no financial incentives for sharing this information and some risk in doing so.
Addressing supply chain vulnerabilities will require both technology and leverage. AI-powered supply chain mapping can help fill informational gaps. This software is already being used in other industries. There are significant limitations, however, to this approach. Christine Michienzi notes that “information obtained from this method does not come from the suppliers themselves and is usually not verified.” It is also “only accurate in that moment in time.” Moreover, AI software has been known to create “false positives” due to its reliance on public data. Finally, the classified nature of some products is an additional complication to using this software in the defense industry. Therefore, software is not sufficient on its own. The Pentagon should use its purchasing power to require greater supply chain transparency from prime contractors, pairing those requirements with financial incentives and strong data privacy protections. Critically, this same analytical effort should extend to adversary supply chains. Understanding where China or others are vulnerable is essential to planning effective countermeasures.
This knowledge would also lead directly to operational planning for missions. The Pentagon would need to provide a tool that allows commanders to assess economic risks, particularly those of supply chain chokeholds that may affect equipment fielding, routine repairs, and depot-level maintenance.
Identifying risks is only half the equation. Mitigating them requires actively managing interagency investment in supply chain resilience. The U.S. government has made significant investments in critical minerals, domestic semiconductor manufacturing, and other strategic goods through the Pentagon, the Departments of Commerce and Energy, the Export-Import Bank, and the Development Finance Corporation. These investments come in varied forms: loans, grants, equity stakes, and instruments like the “golden share” in Nippon Steel. They lack, however, a central coordinating body. These efforts have also been fragmented, geared to a particular sector or material. This ignores the importance of interdependence between sectors. Given that these efforts are justified on national security grounds, placing a coordinating function under the Pentagon is a logical step.
Mitigation of supply chain vulnerabilities also requires shifting the Pentagon’s acquisition mindset. The post-Cold War fixation on lowest-cost procurement is a strategic liability when adversaries can weaponize the supply chains that lowest-cost sourcing created. The Trump administration has begun that shift through acquisition reform that emphasizes speed over cost. The same logic applies to supply chain security: Companies may move to U.S. and allied suppliers if they are confident they will be compensated for the premium.
Operationalizing economic statecraft also requires better intelligence. Here, the United States faces a structural disadvantage: The availability of American financial and corporate data allows adversaries to map U.S. industries with relative ease — identifying bottlenecks, dependencies, and vulnerabilities before any shots are fired. The Pentagon and intelligence community should develop new pathways to collect economic data from U.S. firms operating in China or with significant Chinese business exposure. As Karyn Eliot and Jennifer Buss have argued, this fusion should be bidirectional — information flowing both from and to the private sector. Strong data protections will be non-negotiable, as will trust. Initiatives like the recently formed Business Operators for National Defense offer a foundation, though their mandate would need to expand well beyond acquisitions to support this mission.
Trust among America’s international partners is also of paramount importance. Economic statecraft is most effective when pursued multilaterally, but multilateral coalitions are inherently fragile. Trust building should happen at all levels in the chain of command. For example, combatant commanders, who maintain day-to-day relationships with partner militaries and have direct access to partner nation political leadership, are uniquely positioned to assess coalition cohesion in real time and to flag the conditions under which partners may opt out of U.S.-led economic pressure campaigns. This is intelligence in the operational sense, and it is currently underexploited.
None of this works without education. The best supply chain mapping tools accomplish nothing if commanders do not know how to use them or why they matter. Presently, few “full-time career military members and their civilian counterparts” have expertise in the tools of economic statecraft — “global markets, financial services, acquisitions processes, and proficiency in statecraft.” The adversary’s ability to impede repairs, constrain procurement, or deny critical components is as operationally relevant as its order of battle. Military leaders at every level need to understand these risks and incorporate them into planning.
Economics and logistics have always shaped the capacity to wage war. What is new is the degree to which economic statecraft has become a primary instrument of competition — and the degree to which the United States, having hollowed out its manufacturing base over decades, is exposed to it. The military should reorient accordingly: building tools that let commanders assess economic risk, creating structures that align government and private sector action, and cultivating leaders who understand that the bombs, aircraft, and ships required for modern war are only as effective as the supply chains that sustain them.
Establishing the Economic Warfare Operations Capability, or a similar integrating entity within the Pentagon, is one concrete step toward that reorientation. It will not solve the problem on its own, but it would provide the institutional architecture around which a genuine whole-of-government economic warfare capability could be built.
Anita R. Kellogg, Ph.D., is an assistant professor at the Eisenhower School of the National Defense University. She is also the host of Kellogg’s Global Politics, a podcast on current events in international affairs and U.S. foreign policy.
The views represent those of the author and not the official policy or position of the National Defense University, the Department of Defense, or the U.S. government.
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Image: Airman 1st Class Jared Lovett via DVIDS.
