As the 2020s begin, the world can breathe a collective sigh of relief that the United States has so far avoided a major military crisis with China. Over the past decade, China challenged the lawful rights of U.S. partners and allies in the western Pacific, built massive artificial island bases in the disputed Spratly Islands, and actively sought control over all the waters, seabed, and airspace of the South China Sea. Yet the United States has maintained its access to those waters, deterred any major Chinese use of force against its neighbors, and helped support the efforts of Japan to maintain administrative control over the disputed Senkaku Islands in the East China Sea. U.S. strategy has been notably less successful in preventing China from robbing Southeast Asian partners, including U.S. ally the Philippines, of their resources and rights in the South China Sea. But the United States has at least slowed China’s advance while avoiding war.

It would be unwise, however, to assume that the status quo is stable. Deterrence has not failed—yet. China is unlikely to do something as brazen as forcefully denying U.S. Navy or commercial ships access to the South China Sea, attacking American or Japanese bases, or intentionally sinking Filipino sailors in disputed waters. But Beijing continues to probe and test U.S. and allied resolve, provoking low-level crises which could easily escalate. Current U.S. strategic thinking could trigger disproportionate responses that would cause such crises to spiral out of control. That is the way World War I began a century ago—and it could happen again.

War games seem to confirm these historic lessons. One of us has taken part in numerous simulations over the last five years asking seasoned experts and officials to role-play how Chinese, Japanese, Filipino, and American leaders might respond to crises in the South and East China Seas. The results are typically sobering. Some end in a rapid Chinese fait accompli, such as the seizure of a disputed island with minimal cost, while U.S. and allied leaders dither. This type of scenario would lead to considerable damage to international norms, U.S. alliances, and American national security.

Even more simulations rapidly escalate into full-scale conflict, bringing China and the United States to the doorstep of nuclear war over stakes that no rational observer would consider worth it. The U.S. national security community tends to view the ability to defeat China (or Russia) in combat wherever an ally might be attacked as an essential goal. Direct defense or prompt reversal of any aggression, no matter how small, are the foundational principles of current strategy. Article 5 of the NATO treaty and similar mutual defense commitments to Japan and the Philippines treat all aggression as an equally existential threat. So in a scenario involving a Chinese landing on the Japanese-administered Senkakus or a threat to the Sierra Madre—a derelict Philippine navy ship intentionally ran aground at Second Thomas Shoal in the Spratlys and now housing a dozen soldiers—American strategic culture most often leads to the conclusion that kinetic action to retake a seized feature or outpost is justified to avoid abandoning an ally and damaging U.S. credibility.

But such an escalation, while it should be kept as an option, would be fraught. It might end quickly, amounting to little more than a skirmish, or large-scale conflict between nuclear-armed superpowers could ensue. Both sides would have powerful political incentives to escalate further. Military warning and communications systems might be targeted through cyberattack or other means in a way that sowed confusion. Escalation control could not be guaranteed—history and military scholarship strongly suggest as much, and many war games corroborate it.

Instead of relying exclusively on such escalatory, kinetic military responses, the United States and allies should develop strategies of asymmetric defense and counterattack. An asymmetric defense would weave the economic and diplomatic instruments of statecraft into combat plans. The goal should be to punish Chinese aggression and strengthen the position of U.S. allies, thereby deterring further adventurism, but without leaping several rungs up the escalation ladder as a U.S. counterstrike would. The active elements of the strategy would center on economic warfare and diplomatic cost-imposition.

For most scenarios in the East and South China Seas, it would not be crucial for the United States to immediately reverse an act of aggression. Rather, the most important goals should be to force China to pay an unacceptable price for such action, and at the same time keep the situation from snowballing out of control. Those twin goals could best be achieved via economic and diplomatic rather than military punishment. The United States would need to levy economic sanctions on Chinese entities that supported its actions. These might include construction, shipping, telecommunications, and aviation companies supporting China’s military outposts in the South China Sea, oil and gas enterprises violating its neighbor’s sovereign rights, and well-connected fishing and shipbuilding companies involved with its large paramilitary force.

Such responses should also involve a campaign of diplomatic isolation and public naming and shaming. U.S. military assets should help identify, document, and disseminate evidence of Chinese aggression to the international community. This would support the efforts of U.S. diplomats to convince partners, especially in Asia and Europe, to back a campaign to condemn and isolate China in international forums, exclude it from prominent decision-making bodies, and explore broader international economic sanctions. Much of this would mirror U.S. and allied responses to Russia’s annexation of Crimea and support for paramilitaries in eastern Ukraine.

As in that case, military responses would still be important but would function in a support role. For instance, it would be crucial to strengthen U.S. and allied force posture near the site of aggression, creating a defensive line against further enemy advance. In the case of a South China Sea incident, for instance, U.S. combat aircraft and fire bases might be rapidly deployed to agreed-upon Philippine military bases under the United States’ Enhanced Defense Cooperation Agreement with that ally. This would bolster U.S. rapid response capabilities and hold Chinese surface vessels and military outposts at risk while giving the United States greater control over the escalation risk. U.S. military action might also be used to support the enforcement of economic sanctions levied in retaliation for the initial escalation.

Of course, China should be expected to respond to such a strategy of asymmetric defense with economic retaliation of its own. The United States should therefore work to strengthen economic resiliency and deterrence before a crisis occurs and encourage allies to do the same. The White House should direct the Department of Defense to reach out to nonmilitary agencies like Treasury and Energy to develop integrated economic-military contingency plans. These agencies should also be directed to monitor the potential vulnerabilities of the economies of the United States and its allies to reprisals from China or other adversaries. The U.S. National Defense Stockpile of strategic minerals and metals should be restored to Cold War levels, roughly ten times greater than is the case today ($15 billion versus $1.5 billion) to ensure U.S. resilience in any economic war. And the Committee on Foreign Investment in the United States, or CFIUS, should have its mandate broadened to incentivize, or even mandate, supply-chain diversification for key products with national security significance to avoid excessive reliance on China.

Most of all, policymakers need to be sensitized to the risks of escalation in the types of military incidents most likely to occur between China and the United States. In most scenarios we have seen modeled, the United States has either underreacted to a crisis in the South or East China Seas, at great cost to U.S. and allied national security, or has overreacted, leading to a conflict neither side wanted. It would be nonsensical to risk nuclear war over remote rocks and reefs, but that does not make it impossible.

About Michael O'Hanlon

Michael O’Hanlon is a senior fellow and director of research in Foreign Policy at the Brookings Institution, where he specializes in U.S. defense strategy, the use of military force, and American national security policy. He is the author of The Senkaku Paradox: Risking Great Power War Over Small Stakes.

About Gregory Poling

Gregory B. Poling is director of the Asia Maritime Transparency Initiative and a fellow with the Southeast Asia Program at CSIS. He oversees research on U.S. foreign policy in the Asia Pacific, with a focus on the maritime domain and the countries of Southeast Asia. His research interests include the South China Sea disputes, democratization in Southeast Asia, and Asian multilateralism.