The Arrival of the Economic Security Era: How the US Should Respond to the Next-Generation Technology Competition

When Economic Security Becomes the "Frontline" of National Strategy

From the mask shortages during the pandemic, to the natural gas supply disruptions triggered by the Russia-Ukraine conflict, to the mutual strangleholds between China and the United States over chips and rare minerals, nearly every global upheaval over the past five years has repeated the same lesson: economic interdependence is no longer a natural guarantee of peace, but may instead become a bargaining chip in great-power competition. It is against this backdrop that the Council on Foreign Relations (CFR) special task force report, *U.S. Economic Security*, released in November 2025, attempts to formulate a new competitive agenda for Washington.

The report unusually brings together former commerce secretaries, defense industry leaders, former senior treasury officials, and other figures across party lines. Its core conclusion is that America's leading position in the three foundational fields of artificial intelligence, quantum computing, and biotechnology is being systematically eroded, while existing policy tools have yet to address this structural challenge.

The Cost of Market Failure: Why Does Capital Avoid Future Technologies?

The report notes that, compared with China's whole-of-nation investment, the U.S. innovation system has shown a clear malfunction in addressing long-cycle, highly uncertain foundational technologies. Over the past decade, the Chinese government has spent approximately $900 billion on AI, quantum, and biotechnology—an investment scale sufficient to tip the balance of global R&D competition. American private capital markets, by contrast, have shied away from frontier fields such as quantum computing and biomanufacturing, because these areas lack short-term commercial returns, and both lenders and venture capital are reluctant to participate. In the first half of 2025, early-stage financing for U.S. biotech startups fell 65% year over year—the most direct signal of market failure.

This "market failure" is no accident. Basic research inherently has spillover effects, and the path to industrialization in fields such as quantum and biomanufacturing is far longer than that of software or the internet. When China uses state power to subsidize R&D and capacity expansion, purely commercial return logic can no longer support the competitiveness of U.S. companies. The report therefore recommends that the United States must artificially create a "first push" through means such as defense procurement and government risk-sharing. For example, using Department of Defense demand to drive the construction of the world's first utility-scale quantum computer is precisely an attempt to use state orders to activate private investment.

Supply Chain "Breaking Points": The Overlooked Fatal Dependencies

If underinvestment is a chronic disease, then excessive supply chain concentration is an acute risk. The report discloses a series of startling data points: U.S. reliance on China for rare earths stands at 70%, with heavy rare earths as high as 99%; 80% of critical drug starting materials (KSMs) come from China; one-third of global active pharmaceutical ingredient (API) capacity is concentrated in mainland China; and 80% of U.S. biotech companies have contractual relationships with at least one Chinese supplier. In quantum computing, the United States even has single-source dependence on individual types of laser diodes, mirrors, and amplifiers.These breakpoints mean that once geopolitical conflicts escalate, China's export controls targeting the United States or supply chain disruptions will directly hit America's high-tech industries, defense systems, and public health. Therefore, the report recommends building a six-month strategic reserve of active pharmaceutical ingredients, expanding the defense reserve list, and mapping critical mineral resources together with allies, while also developing substitution and recycling technologies. This is no longer traditional industrial policy for maintaining industrial competitiveness; rather, it is the revival in the digital age of a "defense economics" akin to the stockpiling of strategic materials during the Cold War.

The Boundaries of Government Intervention: Guarding Against the Over-Generalization of "Economic Security"

When national security becomes the all-purpose justification for economic policy, one must also be wary of protectionism spiraling out of control. The report specifically proposes that government intervention is legitimate only when market failures or clearly defined risks of geopolitical concentration exist. This in effect sets an operational framework for "economic security," preventing it from becoming an excuse for unlimited subsidies and trade barriers. For example, support for reshoring printed circuit boards, chemicals, and IC substrates should focus on the portion needed for national security rather than comprehensively rebuilding all manufacturing sectors.

This caution reflects the historical memory of U.S. policy circles regarding industrial policy—technological innovation in the twentieth century often came from public-private cooperation, but excessive state intervention can also suppress market vitality. How to strike a balance between protecting strategic capabilities and maintaining open innovation will be a persistent challenge for the United States in the years ahead.

Global Impact: The Technology Race Is Reshaping the International Order

From a broader perspective, this report is yet another footnote to the unraveling of the globalization narrative. The United States' readiness to use state power to shape technological trajectories will inevitably affect global value chains, trade rules, and alliance relationships. If the United States builds a trust network for critical minerals and multi-layered supply chains through its alliance system, the world will split into parallel systems. While China promotes localization through massive subsidies, the United States attempts to redefine trade through "security"—the technological gap between the two systems may prove more consequential than the ideological divide.

Meanwhile, other countries are also watching how this race unfolds. Europe, Japan, India, and the Global South are all reassessing their own economic security strategies. The future world economy may no longer take "lowest cost" as its sole principle, but will add new dimensions of "strategic resilience" and "managed dependence."

Epilogue

The "American Economic Security" report offers no simple answers, but it confirms a long-term trend: technological leadership is no longer merely a contest among innovative enterprises, but a competition between national systems. In a future where artificial intelligence, quantum technology, and biotechnology are intertwined, whoever can effectively integrate industry, capital, and defense power will define the global rules of the next era. For the United States, the real risk lies not in the investments of external challengers, but in whether its domestic institutions can find a sustainable balance between security and openness, efficiency and resilience.