Deterrence at Scale

Introduction

From the Punic Wars to Franco-Prussian competition in the Renaissance to World War II, history is replete with examples of when industrial capacity—not simply tactical or operational acumen—tipped the scales in a protracted war. As combat grinds into months or years—stressing supply, stockpiles, and capital—the ability to reconstitute and repair capabilities matters. Policymakers within the Beltway have not overlooked these lessons. Faced with China, a potential peer adversary that is a manufacturing powerhouse, and a U.S. defense industrial base that lacks capacity, flexibility, responsiveness, and resilience, D.C. policymakers have sought to revitalize the domestic industrial base through a targeted mix of industrial policy, procurement reform, and investments. These are positive steps, but on their own, they will fall short—particularly if the United States finds itself engaged in a hot war by 2027. Instead, the United States should look to supplement indigenous production with the manufacturing strength of its core allies. Strategic investments by allied corporations in U.S. manufacturing and production can close near-term capability gaps while strengthening the depth of the U.S. defense industrial base over the long term.

Key Takeaways

• The U.S. defense industrial base is not fit for protracted wars.
• Many allied countries have stronger production capabilities than the United States.
• Foreign defense companies, operating through U.S. entities, can add diversity and resilience to the U.S. defense industrial base.

The Limits of American Industrial Ramp-Up

The present U.S. defense industrial base is postured for short, sharp wars grounded in exquisite leap-ahead technologies and precision. It is a direct descendant of U.S. Cold War operational planning. The logic at the time was simple: Employ superior technology to offset Soviet mass. That strategy was tested during the Gulf War, displaying to the world the overwhelming performance of U.S. precision-guided munitions and networked systems. Yet U.S. success bred subsequent strategic weakness. Techno-optimism infused the Pentagon, reinforcing a belief that technological superiority could reliably substitute for mass, durability, and sustained production. Defense consolidation ensued. U.S. defense manufacturing mirrored the decline of U.S. manufacturing in the 1980s—innovation and production were decoupled, supply chains were pushed overseas, subtier suppliers vanished, manufacturing skills atrophied, and incentives to design for scale eroded.

The result is a defense industrial base that is not fit to wage a war of protraction—and the factors that underpin that know-how cannot be changed or rebuilt overnight. Cultural and procedural inertia in defense procurement continues to divorce innovation from production, leaving many successful prototypes that could be scaled floundering in a valley of death. Rebuilding supply chains takes time. Onshoring critical components requires sustained market signals and government subsidies. Roughly a quarter of the defense industrial workforce is at retirement age, with many employable workers choosing to leave or declining to enter it. Manufacturers struggle to replace departing technicians with workers who possess comparable skills and experiences. The United States has a thin pipeline of vocational and apprenticeship programs, leaving few pathways for workers to acquire hands-on defense production expertise. Large-scale procurement that sustains U.S. defense businesses across multiple acquisition cycles still favors exquisite systems while disincentivizing manufacturability, upgradeability, and sustained wartime output.

To quote one defense analyst, “Today, America is a country that might still be able to invent some aspect of the future but [it] cannot reliably produce it.” This is where allied industrial investment and know-how may prove beneficial.

The Benefits of Allied Industrial Strength

In contrast to the U.S. manufacturing drawdown in the post–World War II years, many allied countries invested in production to jumpstart their economies and counter mass unemployment. Japan’s quality production revolution and Germany’s celebrated Fraunhofer model were the result of these state-directed activities, helping spur innovation in manufacturing processes—funded, ironically, by U.S. postwar reconstruction funds. Defense consolidation in the 1990s similarly affected U.S. allies, yet many states preserved their production know-how through more protectionist industrial policies, state-owned enterprises, and subsidies.

Today, the numbers speak for themselves. Manufacturing represents 16.4 percent of gross value across the European Union and approximately 21 percent in Japan, whereas it constitutes a mere 11 percent in the United States. The European Union’s manufacturing sector employs 30 million people, more than double the 13 million employed in American manufacturing. Europe produces more vehicles than the United States and 50 percent more steel (although the United States recently surpassed Japan in steel production for the first time in 26 years). Japan and South Korea are the world’s second and third largest producers of ships, possessing far more advanced shipyards than their American counterparts. In 2024, Europe’s Airbus produced twice as many planes as its troubled American peer Boeing. And while American allies are correspondingly struggling to rearm for protraction, their historic investments in production allude to an underlying strength: a dense ecosystem of specialized skills, industrial process innovations, quality control knowledge, and supplier networks that can be reoriented toward sustained military and strategic manufacturing at scale.

Scaling U.S. Production with Allied Manufacturing Prowess

Allied investment in the U.S. defense industrial base is not new—far from it. From prime contractors with a significant American footprint, such as BAE Systems, to longstanding U.S. suppliers, such as Kongsberg Defence and Aerospace (which is rapidly expanding its U.S. presence), to companies that are newly standing up their own U.S. subsidiaries—such as my own, Helsing—allied corporate investments in U.S. defense have served to diversify and add depth to the U.S. defense industrial base. While I have a commercial interest in expanded allied investment in U.S. defense manufacturing, my role also means that I see daily how foreign partners bring production expertise, supplier networks, and manufacturing culture that domestic consolidation and decades of innovation-production decoupling have eroded from the U.S. industrial base. These allied investments should be celebrated and actively sought out by U.S. policymakers.

U.S. entities—operating under proxy or special security agreements—are a source of financial stability within the U.S. economy, as they bring significant capital investment, spur U.S. defense jobs, and often stimulate downstream suppliers for parts, raw materials, logistics, packaging, and maintenance. Recent investments and partnerships, for example by Hanwha and Hyundai Heavy Industries, promise to infuse technology and transfer knowledge to the fledging U.S. ship industry, spurring production in a sector that has long struggled with declining capacity, rising costs, and intensifying global competition. Other investments will transfer advanced composites expertise and software-driven manufacturing best practices. As the United States struggles to decouple its supply chain from China, particularly in core areas of importance to the Pentagon, such as drones, U.S. entities of foreign defense corporations can support supply chain redundancy, helping secure alternative sources of fibers, alloys, and semiconductors. Together, these investments position allied-owned U.S. defense entities as critical enablers of industrial resilience and defense industrial base revitalization.

Recommendations

U.S. policymakers should institutionalize allied industrial integration into defense planning and acquisition by doing the following:

• Identify and preclear priority industrial sectors—shipbuilding, munitions, aerospace, and autonomy—for allied participation and acquisition.
• Map allied production capacity in those sectors and integrate it into U.S. contingency and surge planning.
• Streamline the proxy and special security agreement process to reduce regulatory friction for trusted allied firms, particularly in those precleared industrial sectors.

Conclusion

The greatest lessons from wars of protraction remain starkly relevant today: Industrial mobilization requires far more time than military mobilization. Preparation in peacetime is a necessity. Allied manufacturing investments can address urgent capability shortfalls now and fortify defense industrial foundations for the future.

About the Author

Jennifer McArdle is the director of Helsing Inc.—the U.S. subsidiary of Helsing—and serves on the Outside Board of Directors of Kongsberg Defense US. She is also an adjunct senior fellow with the Defense Program at the Center for a New American Security.

About the New American Industrial Base Series

This essay series, The New American Industrial Base, features expert practitioners with experience in government, industry, and finance writing on the most pressing challenges in defense acquisition today. For more in this series, click here.

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