President Trump has a unique opportunity in his second term to drive a systemic resetting of the military correlation of forces against China, Russia, North Korea and Iran. His willingness to fundamentally challenge U.S. foreign policy orthodoxy in analyzing the costs and benefits to the U.S. in defending our military allies opens up opportunities that have never been previously possible.
We have been taken to the cleaners by key allies grabbing market share from U.S. companies because these allies were not subject to the U.S.’s unilateral semiconductor export controls on advanced technologies to China. Now, for the first time, we have the opportunity to fundamentally change that.
Semiconductors are not simply another important technology or even a first-among-equals technology; semiconductors are alone in a class of the first order because they undergird all other advanced technologies, including AI.
Ensuring our allies adopt semiconductor export controls that mimic the U.S. policies regarding these primary adversaries, especially China, would provide a nonpareil military advantage to the U.S. Every branch of our military services would become stronger as the U.S. widened the technical lead over our adversaries.
Trump’s criticism of allies
President Trump has railed against U.S. allies that have for decades been economically freeloading on the military protection they receive from the U.S. He notoriously made his startling invitation to Russia to attack NATO members that do not contribute their committed 2% of gross domestic product to defense. He has claimed credit for the subsequent increase in NATO members’ contributions and now demands that it should be increased to 5%.
His complaints about freeloading military allies are not limited to Europe. He has bitterly complained about South Korea’s failure to pay its fair share, which for him is $10 billion a year, for the U.S. troops stationed there. He has threatened to pull out U.S. troops if South Korea does not meet that threshold.
He has even pressed the claim that Taiwan should pay the U.S. for its defense, despite the current U.S. policy of strategic ambiguity about whether the U.S in fact would come to the defense of Taiwan should it ever be attacked by China.
President Trump’s willingness to withdraw military support from our key allies if they do not pay more for their own defense is further strengthened by his complete willingness to hit them with substantially increased tariffs for goods they sell to the U.S.
Shrinking U.S. semiconductor market share
Trump’s critique is even stronger than he has argued because key U.S. allies have done more than simply freeload — they have stolen U.S.’s semiconductor market share in response to U.S efforts that help protect the U.S. and its allies against China’s use of a wide range of advanced military technologies.
When the Biden administration’s Commerce Department unilaterally rolled out export control rules for advanced semiconductor lithography tools sold to China over two-years ago, these rules were widely predicted to be extremely harmful to American semiconductor businesses, especially Applied Materials, Lam Research and KLA.
The export control prohibitions applied only to these U.S. companies and not their two primary foreign competitors, Netherlands-based ASML and Japan-based Tokyo Electron, which proceeded to sell in record quantity competing tools to China. The cost to American businesses is estimated at $130 billion in lower market capitalization and billions in lost sales. This prominent example of lost U.S. semiconductor sales because of unilateral export controls is extensively repeated throughout the entire U.S.-based semiconductor supply chain — resulting in a grave national security threat.
The Biden administration’s subsequent efforts to force our allies to duplicate the extensive U.S. export controls of advanced technologies to China were met over the subsequent two years with two thin slices of salami as face-saving concessions by the Netherlands and Japan to the U.S.
Allies need to get in line on export controls
Trump has in short order greatly expanded the Overton window in how we treat our allies by being willing to levy steep tariffs against their goods or withhold defense protection from them on national security grounds in order to change their behavior.
All national security concerns now need to be put on the table with our allies — not just their economic freeloading by failing to contribute enough financially for the military protection they receive. Our semiconductor allies — Germany, Japan, the Netherlands, South Korea and Taiwan — need to start tracking — and effectively enforcing — semiconductor export controls that mimic the U.S.’s export control regime. They need to stop stealing U.S. semiconductor companies’ market share.
The Biden administration never developed a semiconductor national security strategy and resorted to self-defeating, failed semiconductor national security tactics. The Trump administration has the perfect opportunity to meet this challenge with our allies starting now.
