The global defense industrial and technological base (DITB) has become a cornerstone of national security strategy in the 21st century. Traditionally shaped by alliances, strategic threats, and technological innovation, the DITB is now increasingly influenced by economic and political dynamics—most notably, trade wars. Among these, the U.S.-China trade war stands out for its scope, intensity, and global ramifications. This prolonged economic conflict, which began with tariff exchanges and evolved into a broader confrontation over technology and strategic industries, has significantly affected the global landscape of defense production, innovation, and cooperation. In the interconnected ecosystem of modern defense industries, no nation operates in isolation. Components, raw materials, subsystems, and intellectual capital are frequently shared across borders. Thus, trade wars that disrupt global trade and technology flows reverberate far beyond the immediate participants, impacting allied nations, defense contractors, and innovation hubs across continents. This article explores how such trade conflicts, especially the U.S.-China trade war, are reshaping the DITB globally, with long-term implications for strategic competition, technological superiority, and geopolitical alignments.
At the heart of the trade war is the pursuit of technological dominance. The United States has long held a competitive edge in defense technology, largely due to its advanced research institutions, robust military-industrial complex, and a network of alliances that facilitate collaborative development. However, China’s rapid ascent in key technological domains—including artificial intelligence, quantum computing, hypersonics, and advanced manufacturing—has triggered a recalibration of U.S. trade and security policies. Through policies like “Made in China 2025,” Beijing explicitly sought to reduce its dependence on foreign technology and emerge as a global leader in strategic industries. This ambition was perceived in Washington as a direct challenge to U.S. technological hegemony, prompting measures to curtail China’s access to cutting-edge components, research, and defense-relevant innovations.
A key impact of the trade war on the global DITB has been the disruption of supply chains. Many Western defense contractors rely on components manufactured in China or processed using rare earth elements sourced from Chinese mines. Tariffs and export controls have complicated procurement processes, increased costs, and led to delays in production. For example, the U.S. Department of Defense has had to reconsider its dependence on Chinese-made circuit boards and rare earth magnets, which are critical to missile guidance systems, jet engines, and electronic warfare platforms. In response, the Pentagon has initiated efforts to reshore or diversify supply chains, including investing in domestic rare earth mining and seeking alternative suppliers in Australia, Canada, and Africa. These adjustments, however, are neither immediate nor cost-free; reconfiguring global supply networks requires significant capital, time, and political coordination.
Another consequence has been the fragmentation of the global research and development ecosystem. Historically, defense and dual-use technologies have benefitted from international academic and corporate collaboration. The U.S. and its allies often conducted joint R&D projects, leveraging diverse expertise and shared security interests. However, with the imposition of export controls and restrictions on academic exchange—particularly targeting Chinese nationals—this collaborative model is under strain. American universities and laboratories have tightened scrutiny of foreign researchers, while Chinese institutions have accelerated efforts to develop indigenous capabilities. This decoupling of scientific collaboration limits knowledge exchange and slows the pace of innovation, especially in frontier fields where international synergy was once a competitive advantage.
Export control regimes and entity list designations have further complicated matters. The U.S. Department of Commerce has blacklisted numerous Chinese firms—such as Huawei, ZTE, DJI, and Semiconductor Manufacturing International Corporation (SMIC)—citing concerns over military-civil fusion and national security risks. These restrictions prevent U.S. firms from supplying critical software, hardware, and IP to these entities, thereby impairing their ability to compete and innovate globally. While these measures aim to contain Chinese military modernization, they have also led to unintended consequences. Chinese firms, in response, are accelerating efforts to create domestic alternatives, investing in homegrown semiconductor fabs, satellite navigation systems, and defense AI platforms. This push for technological self-reliance is fostering a more bifurcated global technology landscape, with Western and Chinese ecosystems increasingly incompatible and decoupled.
Allied nations have found themselves caught in the crossfire of this escalating trade conflict. Countries like Germany, South Korea, Japan, and the United Kingdom have advanced defense industries and deep trade ties with both the U.S. and China. They now face difficult choices in aligning their policies. For instance, the U.S. has pressured allies to exclude Huawei from their 5G infrastructure, citing espionage risks. Compliance with such demands often means sacrificing cost-effective technology and provoking economic retaliation from China. Conversely, resisting U.S. pressure could strain security cooperation and jeopardize access to sensitive technologies through the U.S. Foreign Military Sales (FMS) or International Traffic in Arms Regulations (ITAR) regimes. This strategic dilemma is pushing many nations to pursue a “third way” approach—diversifying suppliers, enhancing domestic capabilities, and engaging in regional defense collaboration.
The rise of techno-nationalism is another salient feature of the current environment. As trade wars intensify, nations are increasingly treating technological and industrial capabilities as instruments of sovereign power rather than products of market forces. Governments are offering subsidies, tax incentives, and regulatory support to bolster their domestic DITB. The European Union, for instance, has launched initiatives like the European Defence Fund and Permanent Structured Cooperation (PESCO) to reduce reliance on U.S. technology and foster intra-European defense innovation. Similarly, Japan and India are investing heavily in defense startups and indigenous production under the umbrella of national security imperatives. This shift toward industrial policy is redefining the competitive landscape, where state-backed firms enjoy strategic advantages over purely commercial actors.
In parallel, the trade war has influenced global arms trade dynamics. With traditional defense markets becoming more politically charged, countries are recalibrating their export strategies. China, for example, is aggressively marketing its military hardware to nations in Africa, the Middle East, and Southeast Asia, often positioning itself as a less politically encumbered alternative to Western suppliers. Its drones, air defense systems, and naval vessels have found buyers in states that either cannot afford Western arms or are restricted by Western end-use conditions. On the other hand, U.S. allies are increasingly coordinating their export control frameworks to ensure interoperability and protect sensitive technologies from adversaries. This realignment is creating new blocs in the global arms trade, defined as much by politics as by performance or price.
One area that has come under intense pressure is the semiconductor industry—a critical pillar of both civilian and defense technologies. The U.S. ban on supplying advanced chips and manufacturing equipment to Chinese firms has triggered a global semiconductor reshuffle. Taiwan, South Korea, and the Netherlands—home to key players like TSMC, Samsung, and ASML—are now under diplomatic pressure to align with U.S. export policies. While some have complied, the long-term consequence is a fragmentation of the global chip supply chain. Defense contractors are particularly vulnerable to such disruptions, as modern weapons systems rely heavily on specialized semiconductors for guidance, communications, and control. The growing emphasis on supply chain security may lead to parallel chip ecosystems—one Western-dominated, and the other led by China—with limited interoperability and higher costs.
Cybersecurity and intellectual property (IP) theft concerns have also gained prominence. The U.S. has accused Chinese entities of orchestrating cyber-espionage campaigns targeting defense contractors and research institutions. These allegations have strengthened calls for “digital firewalls” and tighter vetting of foreign partnerships. Consequently, Western defense firms are reassessing their cyber protocols, supplier vetting procedures, and collaborative arrangements with foreign entities. Meanwhile, China has stepped up enforcement of its cybersecurity laws, often under the pretext of national security, making it harder for foreign firms to operate freely within its borders. This mutual distrust further constrains the cross-border flow of ideas and innovations that previously underpinned global defense technology advancements.
Long-term, the trade war is pushing nations toward greater defense industrial autonomy. While this may enhance resilience and security, it also carries risks of duplication, inefficiency, and strategic divergence. In an era of increasingly complex threats—ranging from cyberattacks to space warfare—the need for interoperable, multinational defense solutions is greater than ever. Yet, the trade war fosters fragmentation, with each major power bloc pursuing parallel innovation trajectories. NATO’s interoperability goals, for instance, may be harder to achieve if member states adopt divergent technologies to reduce dependence on foreign suppliers. Likewise, multinational programs like the F-35 or AUKUS may face delays or cost overruns if participating nations are constrained by conflicting trade and tech policies.
On the flip side, the trade war has spurred innovation in unexpected quarters. Emerging economies like India, Brazil, and Turkey are investing in defense R&D as a means to reduce dependence on foreign suppliers caught in geopolitical rivalries. These nations view the current environment as an opportunity to enter global supply chains and position themselves as neutral providers of strategic technologies. Indian firms, for example, are partnering with Russian and Israeli defense contractors to co-develop systems for export. Turkey’s Bayraktar drones, developed amid Western sanctions, have become sought-after products due to their effectiveness and affordability. Thus, while the trade war constrains some actors, it opens doors for others willing to navigate the new terrain creatively.
The global defense industrial and technological base is undergoing a fundamental transformation as a result of escalating trade wars. What began as a dispute over tariffs has evolved into a structural realignment of how nations produce, acquire, and collaborate on defense technologies. The consequences are profound: disrupted supply chains, fractured R&D ecosystems, heightened techno-nationalism, and shifting arms trade patterns. While some nations are doubling down on alliances and shared innovation, others are charting independent paths toward defense autonomy. In this fragmented landscape, agility, foresight, and strategic coordination will be critical. Policymakers and industry leaders must recognize that the DITB is no longer just an economic domain—it is the frontline of 21st-century geopolitical competition.
