Maritime analyst Dr. Sal Mercogliano recently highlighted a critical dynamic shaping modern trade: “The world is diversifying around China, not away from it.”
While economic headlines often celebrate Western supply chains “decoupling” from Beijing, maritime shipping data tells a very different story. Between 2023 and 2025, Chinese containerized exports surged to regional manufacturing hubs—up 40% to India, 36% to Vietnam, and 37% to Thailand.
Rather than pulling manufacturing out of China’s sphere of influence, companies are increasingly relying on a “China + 1” strategy. Raw materials, components, and machinery are still produced in Chinese factories, shipped to South and Southeast Asia for final assembly, and then sent onward to Western markets.
For the U.S. Navy and the defense industrial base, this isn’t true decoupling—it’s re-routing. And it presents serious risks to American sea power.
The Hidden Risks to the Fleet
Naval power relies on secure, resilient supply chains. The expansion of China’s sub-tier manufacturing network impacts U.S. naval readiness across three primary fronts:
- Deep Defense Industrial Base (DIB) Vulnerabilities: Federal regulations strictly forbid purchasing major military hardware directly from strategic competitors. However, Tier-3 and Tier-4 sub-suppliers—who provide basic electronics, circuit boards, and specialized alloys—remain heavily dependent on Chinese inputs. In a crisis, Beijing could restrict exports of critical sub-components, stalling U.S. ship construction and maintenance.
- The Critical Mineral Bottleneck: Modern warships depend on Rare Earth Elements (REEs) for permanent magnets, radar systems, sonar arrays, and electric motors. An Arleigh Burke-class destroyer requires roughly 5,200 lbs of rare earth elements, while a Virginia-class submarine requires 9,200 lbs. Because China controls over 80% of global REE refining capacity, shifting final assembly to third-party nations does not resolve this primary vulnerability.
- Strained Sea Lines of Communication (SLOCs): Multi-leg supply chains (China \rightarrow Southeast Asia \rightarrow U.S.) make maritime trade routes longer and more fragmented. This places greater operational demand on the U.S. Navy to monitor, protect, and maintain freedom of navigation across critical maritime chokepoints like the South China Sea and the Strait of Malacca.
Policy Action: The Return of Domestic Industrial Mobilization
Recognizing these deep supply chain risks, federal leaders recently announced the revival of a World War II-era model: the Smaller War Plants Commission (SWPC), spearheaded by the Department of Defense and the Small Business Administration (SBA).
Because roughly 70% of the defense industrial base consists of small businesses, this initiative targets the exact lower-tier chokepoints that threaten naval readiness. By expanding capital access and streamlining support for small domestic manufacturers, the SWPC focuses on critical areas:
- Domestic production of microelectronics and legacy chips.
- Critical mineral refining on American soil.
- Specialized castings, forgings, and shipbuilding components.
Rebuilding the U.S. Fleet requires ensuring American warships aren’t grounded by missing foreign-sourced parts during a crisis. Programs like the SWPC are essential steps toward restoring true maritime sovereignty.
Rebuilding True Maritime Strength
Securing U.S. naval readiness requires moving past the illusion of trade diversification:
- Map Deep-Tier Supply Chains: Track sub-tier components to eliminate single-point dependencies on foreign raw materials.
- Onshore Critical Refining: Leverage domestic programs to build processing facilities for critical minerals and defense components.
- Expand Shipyard Infrastructure: Invest directly in U.S. commercial and naval shipyard capacity so the fleet can build, maintain, and repair vessels independently.
As Dr. Mercogliano’s analysis reminds us, trade routes may shift on paper, but strategic dependencies remain. Rebuilding American sea power means securing the industrial foundation behind every ship, sensor, and sailor.
Take Action for American Sea Power
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