The United States needs a clearer strategy for economic warfare, utilizing financial, industrial, trade, and regulatory tools to enhance its defense base and impede rivals like the Chinese Communist Party from building military power. The new Economic Defense Unit and FY 2026 National Defense Authorization Act provisions aim to transform government contracts into bankable assets, accelerating U.S.
military and technological advantage in long-term competition. Economic warfare operates on principles of fungibility, elasticity, and market making, requiring transaction-level visibility to prevent evasion. This approach targets the "machinery behind" an adversary's armed forces—flows of capital, materials, and access—rather than direct combat. It balances market efficiency with strategic asymmetry, aiming to increase a state's own military capabilities while degrading an adversary's conversion function, applicable in both peacetime and wartime. Historically, military power evolved from command-driven extraction to market-dependent financing and industrial mobilization, underscoring the economic system's role in sustaining forces. Sanctions are noted for their high collateral damage relative to strategic effect.
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