Trade & U.S. National Security: What Constitutes an International Economic Emergency
The MOC
By
John D. McCown
June 11, 2025
The vast majority of the world’s trade moves on merchant vessels that circle the global in an amazingly efficient conveyance system. Comprised of 17,546 ships more than 600’ in length, that fleet moved $11.7 trillion worth of goods in 2017 that were equal to 15 percent of the gross world product.[1] Because more than three-fifths of that gross world product is represented by services, the net result is that cargo moved by vessels equaled 41 percent of tangible worldwide goods.[2] In other words, almost half of what can be touched in the entire global economy makes its way from where it is made to where it is consumed in one of these vessels. World trade as we know it today simply could not exist without the efficient Leviathans of the global cargo fleet.
It is axiomatic that trade has reduced global tensions. IBM got it right with a slogan they had inscribed on the facade of their New York headquarters building: “World Peace Through World Trade”. It is not surprising that the first non-American selected to be on IBM’s board of directors was Maersk McKinney Moller, the creator of the largest container shipping enterprise in the world.
In addition to fostering global understanding and cooperation, trade collectively enhances the economies of the countries involved. Trade can be highly disruptive, just as are all economic advances; however, the issues arising from that disruption rest with policymakers who have not developed frameworks to more evenly distribute the clear benefits of trade. The broad anti-trade rhetoric now coming from some U.S. policymakers is in effect calling for significant reductions or even complete eliminations of some types of trade. That is akin to saying cars kill fifty thousand annually so we need to move towards making them illegal instead of implementing safety regulations and measures.
In the broadest sense, the impact of trade does go well beyond GDP, census figures and the economy. In reducing global tensions, national security has been improved for all countries. My May 2024 article presented the case for globalization actually preserving U.S. national security.
In the post-WWII period, the value of the United States’ trade with foreign countries has increased almost 800-fold.[3] All countries have experienced geometric increases in the absolute and relative importance of trade in their economies with some showing even more growth than the Unites States. A shared characteristic everywhere has been the central and irreplaceable role of shipping. Trade has revolutionized the world economy and lifted hundreds of millions out of poverty. A prime catalyst for that has been the sharp improvement in shipping cost economics through both scale and specialization. Shipping costs relative to cargo value went from being a meaningful or prohibitive percent to an exponentially lower and sometimes almost inconsequential percent, minimizing the barrier of distance. With that fundamental structural change, world trade exploded. There are twenty times as many merchant ships spread across the oceans compared to all the ships now operated by the navies in the world. In doing its primary job of moving 63.9 trillion ton-miles of cargo[4] annually, this larger merchant navy also acts to reduce the likelihood of conflict. That is the very embodiment of the concept of world peace through world trade.
Not all trade is equally beneficial and there can be situations where certain transactions are an unacceptable risk to national security. Most agree that those cases call for government intervention. While the power to impose tariffs under the constitution resides with Congress, legislation has been passed to give the executive branch limited ability to take action at his discretion. One such law is the International Emergency Economic Powers Act (IEEPA). This law has been in the news recently as it was the basis for the reciprocal tariffs announced by President Donald Trump on April 2, 2025.
The IEEPA was passed by Congress and signed into law by President Jimmy Carter in 1977. It gave the president authority to regulate international commerce after declaring a national emergency resulting from an extraordinary threat coming from outside the United States. Congress enacted IEEPA in large part to restrict presidential power in declared national emergencies that was being used under the Trading with the Enemy Act of 1917 (TWEA). Emergencies had been declared without any limitations and a 1973 Senate investigation found that numerous emergencies going back to 1933 remained in effect. Those emergencies were terminated and the IEEPA was put in place to restore emergency power in a limited form that could be overseen by Congress in required reports every six months on the threats and actions taken.
Prior to its use related to the reciprocal tariffs, the IEEPA has been utilized in a limited manner and typically focused on a precise action targeted at groups or countries with whom the United States had little or no economic relationship. For instance, in 2001 President George W. Bush invoked IEEPA to block the assets of al- Qaeda. In 2012, IEEPA was used by President Barack Obama to block property belonging to terrorist groups operating in Yemen.
The use of the IEEPA by President Trump related to tariffs did not involve a similar narrow approach. He declared that the national emergency was the actual trade deficit itself and as a result he enacted meaningful tariffs on imports from most countries as the way to address that emergency. In 2024, the total U.S. trade deficit was $918 billion, which was equivalent to 3.15 percent of the $29.1 trillion GDP. That was not the largest recent trade deficit and was 5.5 percent below the record $971 billion deficit in 2022. The chart below shows the actual U.S. trade deficit as a percent of GDP over the last ten years.
The 2024 deficit as a percent of GDP was actually below both 2021 and 2022, with it being one-sixth below the actual level in the latter year. In fact, the overall deficit percentage over the ten-year period was 3.04 percent, meaning that 2024 was less than one-twenty fifth more than the cumulative experience. Even if one accepts the premise that trade deficits are inherently bad, the actual numbers do not support a case for the recent experience being any sort of national emergency.
As to whether trade deficits in and of themselves are bad, the U.S. dollar serves as the reserve currency of the world and as such we are destined to have such deficits. Most countries in the world want to retain dollars for their own financial stability and a simple way to do that is to exchange their goods for our currency. People who lament trade deficits always seem to ignore that in exchange for their currency, consumers are getting tangible goods that they value at least as much or more than that currency. To equate a trade deficit with a transfer of value of the same amount is intellectual farce.
The reciprocal tariffs were initially imposed on some 90 countries at rates ranging from 10 percent to 49 percent. They applied to all goods imported from those countries including allies like the United Kingdom, European Union members, Japan, and South Korea. Subsequent retaliatory tariffs imposed by China resulted in an escalation of tariffs to 145 percent until a 90 day pause was announced on April 9, 2035 that brought the China tariff to 30 percent and all other tariffs to 10 percent.
In a unanimous decision on May 28, 2025 the Court of International Trade ruled that the reciprocal tariffs enacted under IEEPA exceeded President Trump’s authority under the law. That decision has been stayed pending an appeal by the government. With the facts and the black letter of the IEEPA, it is likely the decision of this specialized trade court will be sustained. The Wall Street Journal’s May 30, 2025 editorial recommended that President Trump not invoke other authorities replace the reciprocal tariffs with others.
The tariffs enacted under IEEPA were not justified for reasons related to national security. If history is a guide they could have the opposite effect. There is a relevant historical example of a trade policy change that presaged something that went well beyond trade retaliation. Prior to WWII, the United States was the main supplier to Japan of oil, steel, and other critical commodities. In mid-1941, Washington instituted a full embargo on exports to Japan. The cutoff of oil, which was followed by U.S. allies, put Japan in an untenable position. Less than six months later, Japan attacked Pearl Harbor and the United States was involved in World War II. Shortly thereafter, Indonesia was invaded by Japan to secure most of the oil in needed. The motivation for the U.S. embargo is debated, but it is clear that it was a major catalyst for Japan deciding to go to war. That much is evident in a communication from Japan’s foreign minister after the embargo went into effect.
If there is anything connected with the maritime supply chain related to trade that is a real risk to national security today, it is the allegiance of merchant ships that move the cargo. In the event of a national emergency such as an invasion of Taiwan by China, the only ships that can be completely counted on to provide critical sealift capacity are U.S. flag vessels. Of the 17,546 merchant ships delivering 99.77 percent[5] of the world’s non-contiguous trade, only 187 (1.07 percent) are U.S. flag. If the Jones Act vessels engaged in domestic commerce are excluded, only 95 are U.S. flag ships engaged in international commerce which are only 0.54 percent of the world’s merchant fleet. In contrast, there are 2,353 Chinese flag ships or 13.41 percent[6] of the total. The three largest flag registries are Panama, Liberia, and the Marshall Islands that together represent 41.82 percent[7] of the world’s merchant fleet. Excluding those largest flag of convenience registries, Chinese registries have the most ships. My analysis suggests that half the world’s merchant ships are in effect employed full time in moving cargo to and from China. The ability of China to leverage its influence to prevent ships assisting the United States in the event of an invasion of Taiwan should not be underestimated.
A righteous use of IEEPA would be to declare that the record low use of U.S. flag ships in international trade is a national emergency. The solution would be to immediately authorize expansion of the Maritime Security Program to accommodate at least another 100 ships. The expansion would be focused on the dual use vessels that would be most useful to the military, such as roll-off, roll-off ships in times of an emergency. The stipend would be reviewed to ensure that it would be attractive to shipowners to reflag the most sought-after ships and fully cover the differential U.S. crewing cost. These ships will engage in typical foreign trade lanes of their choosing with minimal obligations other than to accept full direction in the event a national emergency is declared.
It is imperative that immediate action be taken to add at least 100 U.S. flag ships operating in international commerce over the next couple of years. The United States has the most powerful military in the world funded by an $850 billion annual budget. But when it comes to the projection of that military strength, particularly in the faraway conflict that many experts expect if China invades Taiwan, our sealift capacity could be more of an Achilles’ heel than we recognize. Prudence demands that we take action to address the clear and present danger in our ability to project military power with assured sealift capacity.
John D. McCownis a Non-Resident Senior Fellow at the Center for Maritime Strategy. Mr. McCown has four decades of experience related to the shipping industry. His research, analysis and writings for the Center for Maritime Strategy focus on the intersection of merchant shipping and maritime commerce with national security.
The views expressed in this piece are the sole opinions of the author and do not necessarily reflect those of the Center for Maritime Strategy or other institutions listed.
Center for Maritime Strategy
By John D. McCown
The vast majority of the world’s trade moves on merchant vessels that circle the global in an amazingly efficient conveyance system. Comprised of 17,546 ships more than 600’ in length, that fleet moved $11.7 trillion worth of goods in 2017 that were equal to 15 percent of the gross world product.[1] Because more than three-fifths of that gross world product is represented by services, the net result is that cargo moved by vessels equaled 41 percent of tangible worldwide goods.[2] In other words, almost half of what can be touched in the entire global economy makes its way from where it is made to where it is consumed in one of these vessels. World trade as we know it today simply could not exist without the efficient Leviathans of the global cargo fleet.
It is axiomatic that trade has reduced global tensions. IBM got it right with a slogan they had inscribed on the facade of their New York headquarters building: “World Peace Through World Trade”. It is not surprising that the first non-American selected to be on IBM’s board of directors was Maersk McKinney Moller, the creator of the largest container shipping enterprise in the world.
In addition to fostering global understanding and cooperation, trade collectively enhances the economies of the countries involved. Trade can be highly disruptive, just as are all economic advances; however, the issues arising from that disruption rest with policymakers who have not developed frameworks to more evenly distribute the clear benefits of trade. The broad anti-trade rhetoric now coming from some U.S. policymakers is in effect calling for significant reductions or even complete eliminations of some types of trade. That is akin to saying cars kill fifty thousand annually so we need to move towards making them illegal instead of implementing safety regulations and measures.
In the broadest sense, the impact of trade does go well beyond GDP, census figures and the economy. In reducing global tensions, national security has been improved for all countries. My May 2024 article presented the case for globalization actually preserving U.S. national security.
In the post-WWII period, the value of the United States’ trade with foreign countries has increased almost 800-fold.[3] All countries have experienced geometric increases in the absolute and relative importance of trade in their economies with some showing even more growth than the Unites States. A shared characteristic everywhere has been the central and irreplaceable role of shipping. Trade has revolutionized the world economy and lifted hundreds of millions out of poverty. A prime catalyst for that has been the sharp improvement in shipping cost economics through both scale and specialization. Shipping costs relative to cargo value went from being a meaningful or prohibitive percent to an exponentially lower and sometimes almost inconsequential percent, minimizing the barrier of distance. With that fundamental structural change, world trade exploded. There are twenty times as many merchant ships spread across the oceans compared to all the ships now operated by the navies in the world. In doing its primary job of moving 63.9 trillion ton-miles of cargo[4] annually, this larger merchant navy also acts to reduce the likelihood of conflict. That is the very embodiment of the concept of world peace through world trade.
Not all trade is equally beneficial and there can be situations where certain transactions are an unacceptable risk to national security. Most agree that those cases call for government intervention. While the power to impose tariffs under the constitution resides with Congress, legislation has been passed to give the executive branch limited ability to take action at his discretion. One such law is the International Emergency Economic Powers Act (IEEPA). This law has been in the news recently as it was the basis for the reciprocal tariffs announced by President Donald Trump on April 2, 2025.
The IEEPA was passed by Congress and signed into law by President Jimmy Carter in 1977. It gave the president authority to regulate international commerce after declaring a national emergency resulting from an extraordinary threat coming from outside the United States. Congress enacted IEEPA in large part to restrict presidential power in declared national emergencies that was being used under the Trading with the Enemy Act of 1917 (TWEA). Emergencies had been declared without any limitations and a 1973 Senate investigation found that numerous emergencies going back to 1933 remained in effect. Those emergencies were terminated and the IEEPA was put in place to restore emergency power in a limited form that could be overseen by Congress in required reports every six months on the threats and actions taken.
Prior to its use related to the reciprocal tariffs, the IEEPA has been utilized in a limited manner and typically focused on a precise action targeted at groups or countries with whom the United States had little or no economic relationship. For instance, in 2001 President George W. Bush invoked IEEPA to block the assets of al- Qaeda. In 2012, IEEPA was used by President Barack Obama to block property belonging to terrorist groups operating in Yemen.
The use of the IEEPA by President Trump related to tariffs did not involve a similar narrow approach. He declared that the national emergency was the actual trade deficit itself and as a result he enacted meaningful tariffs on imports from most countries as the way to address that emergency. In 2024, the total U.S. trade deficit was $918 billion, which was equivalent to 3.15 percent of the $29.1 trillion GDP. That was not the largest recent trade deficit and was 5.5 percent below the record $971 billion deficit in 2022. The chart below shows the actual U.S. trade deficit as a percent of GDP over the last ten years.
The 2024 deficit as a percent of GDP was actually below both 2021 and 2022, with it being one-sixth below the actual level in the latter year. In fact, the overall deficit percentage over the ten-year period was 3.04 percent, meaning that 2024 was less than one-twenty fifth more than the cumulative experience. Even if one accepts the premise that trade deficits are inherently bad, the actual numbers do not support a case for the recent experience being any sort of national emergency.
As to whether trade deficits in and of themselves are bad, the U.S. dollar serves as the reserve currency of the world and as such we are destined to have such deficits. Most countries in the world want to retain dollars for their own financial stability and a simple way to do that is to exchange their goods for our currency. People who lament trade deficits always seem to ignore that in exchange for their currency, consumers are getting tangible goods that they value at least as much or more than that currency. To equate a trade deficit with a transfer of value of the same amount is intellectual farce.
The reciprocal tariffs were initially imposed on some 90 countries at rates ranging from 10 percent to 49 percent. They applied to all goods imported from those countries including allies like the United Kingdom, European Union members, Japan, and South Korea. Subsequent retaliatory tariffs imposed by China resulted in an escalation of tariffs to 145 percent until a 90 day pause was announced on April 9, 2035 that brought the China tariff to 30 percent and all other tariffs to 10 percent.
In a unanimous decision on May 28, 2025 the Court of International Trade ruled that the reciprocal tariffs enacted under IEEPA exceeded President Trump’s authority under the law. That decision has been stayed pending an appeal by the government. With the facts and the black letter of the IEEPA, it is likely the decision of this specialized trade court will be sustained. The Wall Street Journal’s May 30, 2025 editorial recommended that President Trump not invoke other authorities replace the reciprocal tariffs with others.
The tariffs enacted under IEEPA were not justified for reasons related to national security. If history is a guide they could have the opposite effect. There is a relevant historical example of a trade policy change that presaged something that went well beyond trade retaliation. Prior to WWII, the United States was the main supplier to Japan of oil, steel, and other critical commodities. In mid-1941, Washington instituted a full embargo on exports to Japan. The cutoff of oil, which was followed by U.S. allies, put Japan in an untenable position. Less than six months later, Japan attacked Pearl Harbor and the United States was involved in World War II. Shortly thereafter, Indonesia was invaded by Japan to secure most of the oil in needed. The motivation for the U.S. embargo is debated, but it is clear that it was a major catalyst for Japan deciding to go to war. That much is evident in a communication from Japan’s foreign minister after the embargo went into effect.
If there is anything connected with the maritime supply chain related to trade that is a real risk to national security today, it is the allegiance of merchant ships that move the cargo. In the event of a national emergency such as an invasion of Taiwan by China, the only ships that can be completely counted on to provide critical sealift capacity are U.S. flag vessels. Of the 17,546 merchant ships delivering 99.77 percent[5] of the world’s non-contiguous trade, only 187 (1.07 percent) are U.S. flag. If the Jones Act vessels engaged in domestic commerce are excluded, only 95 are U.S. flag ships engaged in international commerce which are only 0.54 percent of the world’s merchant fleet. In contrast, there are 2,353 Chinese flag ships or 13.41 percent[6] of the total. The three largest flag registries are Panama, Liberia, and the Marshall Islands that together represent 41.82 percent[7] of the world’s merchant fleet. Excluding those largest flag of convenience registries, Chinese registries have the most ships. My analysis suggests that half the world’s merchant ships are in effect employed full time in moving cargo to and from China. The ability of China to leverage its influence to prevent ships assisting the United States in the event of an invasion of Taiwan should not be underestimated.
A righteous use of IEEPA would be to declare that the record low use of U.S. flag ships in international trade is a national emergency. The solution would be to immediately authorize expansion of the Maritime Security Program to accommodate at least another 100 ships. The expansion would be focused on the dual use vessels that would be most useful to the military, such as roll-off, roll-off ships in times of an emergency. The stipend would be reviewed to ensure that it would be attractive to shipowners to reflag the most sought-after ships and fully cover the differential U.S. crewing cost. These ships will engage in typical foreign trade lanes of their choosing with minimal obligations other than to accept full direction in the event a national emergency is declared.
It is imperative that immediate action be taken to add at least 100 U.S. flag ships operating in international commerce over the next couple of years. The United States has the most powerful military in the world funded by an $850 billion annual budget. But when it comes to the projection of that military strength, particularly in the faraway conflict that many experts expect if China invades Taiwan, our sealift capacity could be more of an Achilles’ heel than we recognize. Prudence demands that we take action to address the clear and present danger in our ability to project military power with assured sealift capacity.
John D. McCown is a Non-Resident Senior Fellow at the Center for Maritime Strategy. Mr. McCown has four decades of experience related to the shipping industry. His research, analysis and writings for the Center for Maritime Strategy focus on the intersection of merchant shipping and maritime commerce with national security.
The views expressed in this piece are the sole opinions of the author and do not necessarily reflect those of the Center for Maritime Strategy or other institutions listed.
[1] John D. McCown, Giants Of The Sea: Ships & Men Who Changed The World (2020), pages 1 and 8
[2] McCown, supra note 1, page 1
[3] McCown, supra note 1, page 1
[4] McCown, supra note 1, page 6
[5] McCown, supra note 1, page 229
[6] McCown, supra note 1, page 255
[7] McCown, supra note 1, page 255