As Donald Trump zigs and zags on tariffs and trashes America’s reputation as a safe and stable place to invest, China has a big gun that it could bring to this tariff knife fight. Behind Japan, China has the world’s second largest holdings of American debt.

As a huge US creditor, if China started selling off US treasuries...well, this article give a succinct take on the carnage that would ensue from what would be a path of Mutually Assured Destruction. But then again, having the world’s two biggest economies no longer, in effect, trading with each other is also pretty serious, right?

New Zealand may think it has got off lightly with only a 10% tariff on its exports to the US. Yet China is our biggest export market, and we stand to become collateral damage if serious harm is done by our good friends in Washington to China’s ability to buy our stuff. Where China goes, we go. If China sneezes, we get a cold etc. Further evidence that the biggest threat to our economic security is not Red China, but red, white and blue America.

Defending the Indefensible

Now, let's put on our Bad China hat and talk defence.... Gosh, we had to wait years for this flimsy Defence Capability Plan (DCP)? What the public got given earlier this week was a 25 page document filled with back-of-the-envelope costings meant to justify a gigantic $12 billion spending spree of public money over the next four years. Incredibly, the price range for the majority of the “indicative” costings in the categories listed were framed in “It could cost this, but it could also cost two or three times as much” terms. Or, for variation, it could cost “up to $50 million” to get this, and it could cost “$2 billion plus” to get that.

 

There were also a few interesting holes in the indicative costings. Separately, I added up the low estimate approximations and the high approximations for the categories for which an indicative price range was given. The low estimate total came to $5.4 billion. The high estimate total came to $7.4 billion. All of the media coverage this week has cited the $12 billion figure, with $9 billion of it being new money.

What is going on here? Explanation: there are several outliers. Some of the uncrewed technology/EEZ patrol capability envisaged hasn’t been given even an indicative cost. Moreover, the really significant item mentioned in the DCP for which not even an indicative cost has been given, is the frigates replacement. Until this is a fait acccompli, the public appear to be being kept none the wiser about the likely size of the bill for these ships, let alone whether they’re a good investment.

Why this glaring omission? Is it because it would have been politically difficult for Defence Minister Judith Collins to justify spending somewhere around $5 billion plus for the frigate replacements alone, an outlay likel;y to match or exceed the combined cost of almost everything else on the Defence wishlist? So, simple question...what is the indicative cost of the frigate replacement? MoD must have done the numbers.

Back in the real world

As well all know, the funding for state housing, public health and state schools is either being cut in real terms, and/or those sectors are being made to justify every single dollar they spend. Yet for Defence, it is all blue skies and green lights on the funding highway. Sure, every major item in the DCP will still need to make an individual business case and gain Cabinet approval. That is hardly reassuring. It means that the DCP is worthless as a guide to future costs. Defence procurement has a sorry track record when it comes to cost blow-outs.

This isn’t ancient history, either. Has anyone yet told Winston Peters that the ongoing, escalating costs of one of NZF’s pet purchases – the four Poseidon P-8A planes based at Ohakea – now rival the size of the blow-out on the iRex ferries project? In an echo of iRex, the planes themselves were valued by the Pentagon at only $US1.46 billion but the cost of kitting them out, situating them at Ohakea, maintaining them, housing their crew, paving their runways and processing their findings is heading for a billion dollar over-run on the initial amount. The DCP sets aside even more funds to meet the Poseidons’ current and future needs.

Lastly, the DCP makes little or no mention of climate change, the reliability of the US as a defence ally, or the real military balance of power in the Pacific region in which the US still enjoys overwhelming military superiority over China. There is no hint in the DCP document that our current trade dependence on China might pose a risk to our national security.

Some Defence myths

The projected $12 billion spending spree on Defence over the next four years has come wrapped in political spin. Here are a few of the main themes.

1. Myth # One: We have to re-arm because the world is now a more dangerous place.

For the past 60 years, the military industrial complex has consistently fuelled the public’s concern about an imminent, existential threat to all that we hold dear. Yet is the modern world really more unsafe now than during the Cuban missile crisis, or when the US and the USSR were facing off during the Cold War, across the Berlin Wall? No, it isn’t. Is the world a more dangerous place now that Donald Trump is the US President once again? Yes it is. But I can't find the line item in the DCP to counter that threat.

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If the world has changed so drastically, how come nothing has changed in the shape of the MoD response? The DCP document merely swaps out the USSR for China as the Big Bad. Otherwise, our response remains exactly the same as it was in the days of Empire: join our traditional allies as a junior partner (“force multiplier” is the current jargon term) in military operations conceived, managed and led by the US, UK and Australia with us running along behind, doing our bit.

What has actually changed plays no part in the DCP document. Under Trump, the US can no longer be regarded as a reliable ally. True enough, Australia is cited in the DCP as the dependable friend with whom we need to remain inter-operable. And we know how that relationship goes. The only mention of New Zealand in the 2023 Australian Defence Strategic Review document was this bit at page 46, para 6:8: 

The Pacific is critical to the security of Australia and the region.. Australia’s positive work in development assistance, disaster response and multilateralism remains essential. New Zealand is a key partner for Australia in the region.

Note how, in that last sentence, New Zealand is described as a key partner “for” Australia, and not “with” it. A useful reminder that we’re seen by the Aussies as their deputy in the Pacific, and not as an equal partner.

Back to the DCP

The DCP document fails to acknowledge the new strategic reality (and cost implications) created by the US making its military and economic commitments now conditional on its own priorities first being met, and its own interests first being satisfied. Otherwise, the message from the White House is that former allies have to fend for themselves, here and in the Pacific.

As a result, several European nations are reportredly concluding that they can no longer regard the US as a reliable ally, or even as a dependable source of weapons systems, ammunition, maintenance, military cyber systems and logistics support – all of which can now be potentially subject to a “kill switch” if the future uses of this hardware fail to harmonise with America’s economic and strategic priorities.

Portugal, Canada and other NATO allies having second thoughts about purchasing F-35s were reportedly concerned that the planes might have a “kill switch” that would permit a hostile US president to immobilize them. The manufacturer, Lockheed Martin, hastily denied the rumor. But there is a metaphorical kill switch, in that F-35s require maintenance, munitions, parts and software upgrades that must be approved by Washington.

Meaning: old loyalties mean nothing in the current context. So what planning, if any, is in train within MoD in recognition of this emerging new environment for defence procurement and maintenance? None, apparently. Despite all the chatter about a “changed” threat profile, there is no recognition that the key change is not in the superpower balance of military capability in the Pacific region (which is still weighted heavily in America’s favour) but in the re-configuration of the West’s alliance structure, and in the supply chains that used to come with it.

What do we do when we have only Australia to rely on - and from whom should we source the wherewithal for Defence? The DCP doesn’t concern itself with such trifles. It peddles the same old responses – more funds, more weapons, same junior role alongside the allies of yore – to justify a lazily costed Defence spend-up that it hopes will appease the fickle and delusional warlord in the White House.

Good luck with that. We are bending our needs (and our knees) to placate someone who only last week said that the United States has been “looted, pillaged, raped and plundered” by “friend and foe alike” for “more than 50 years.” Yep. To Trump, we’re no longer a friend. We (and Australia) are the Harvey Goldsteins of the South Pacific.

2. Myth # Two: We need this stuff to do humanitarian work at home, and in the Pacific.

This notion is promoted to put a halo of virtue around New Zealand’s defence spending. Reality check: if you’re doing cyclone relief work or trying to find a sailor lost at sea, you don’t need to do it via $3 billion worth of Poseidon aircraft jammed to the gills with highly expensive anti-submarine detection gear. There are better, cheaper, and purpose-built ways of doing disaster relief and rescue work.

In any case, the NZDF can be really bad at such tasks e.g. the water relief fiasco that NZDF presided over in Gisborne after Cyclone Gabrielle. In general, NZDF uniformed staff don’t like doing humanitarian work, because it's not the “bang bang” stuff they signed on for. Reportedly, the NZDF’s participation in humanitarian work in Covid isolation facilities was the direct cause of hundreds of resignations.

At least the Aussies are more upfront. In the 2023 Australian Defence Strategic Review the use of defence forces for humanitarian relief was actively disparaged. The chapter on climate change (pages 40-41)argued that doing disaster relief at home or in the Pacific should be the ADF’s very lowest priority. That’s because the ADF feels it imperative to concentrate its resources on the hard geo-strategic priorities, and not on the girly stuff related to climate change mitigation. Suck it up, Pacific Forum.

See chapter 5, para 5 of the Aussie review document for more in this vein: “Defence must be the force of last resort for domestic aid to the civil community.” Got it. So spare us the bullshit about the NZDF needing this expensive stuff to be there to help us out. They don’t need the tools of “enhanced lethality” to do relief work, it isn’t a major priority for them and if you make them do humanitarian work for any length of time, they’ll quit.

In short, the government citing humanitarian work as a rationale for defence spending reminds me of the people who used to say they bought Playboy for the articles.

3. Myth #3 China poses an imminent threat.

New Zealand is not at risk of invasion now, or in the future. We have not been at risk of invasion since the early 1940s (80 years ago) and since then, we have never configured our defence forces to repel an invasion. Over the past decade, the military emphasis has been away from defending the homeland, and towards projecting force far afield. Weirdly though, this week’s DCP chooses to resurrect the ancient spectre: “We should never rule out that we may need to defend ourselves.”

Against who? Yes, we are a small trading nation that needs to keep its trade routes open. Yet by the same logic, China is a big trading nation that also needs to keep its trade routes open, because it, too, needs access to global markets, and is not self-sufficient in oil. The fear that China will – someday – unilaterally shut off the trade routes through the South China Sea that its own economic prosperity depends upon, is deeply irrational. We don’t need to spend billions to help deter China from committing economic suicide, because China is showing no inclination to do so.

Regardless, the DCP dutifully rings the alarm about the China threat:

China’s assertive pursuit of its strategic objectives is the principal driver for strategic competition in the Indo-Pacific, and it continues to use all of its tools of statecraft in ways that can challenge both international norms of behaviour and the security of other states. Of particular concern is the rapid and non-transparent growth of China’s military capability...

Really? In our self-designated neighbourhood of the Pacific, when and where have those wily Chinese actually been using their “tools of statecraft” in ways that challenge “international norms of behaviour” and threaten “the security of other states?” This hyperbole smacks of paternal condescension. Pacific states seem more than able to negotiate with China to mutual benefit, without us sending up a gunboat.

Talking of gunboats, it would have been nice if the US, UK and Australia had used the “tools of statecraft” to consult with our Pacific neighbours before springing AUKUS on then, given that the AUKUS pact involves sailing nuclear submarines through Pacific waters with hostile intent.

Competing interests

The sticking point for MoD is the word “competition.” For decades the West has treated the Pacific as an American lake. China’s emergence as a global and regional superpower is being treated by MoD as intolerable – even if our actions to “deter” China from pursuing its diplomatic and military presence in the Pacific raises the risk of an accidental war. In one of its saner moments, our 2021 Defence Assessment Review conceded that current defence settings could cause everyone to blunder by accident into WW3:

100. Even without strategic intent, the growing numbers and operational proximity of military assets from competing states, coupled with increasingly assertive actions and robust responses, raise the risks of tactical miscalculation leading to unintended conflict.”

Yes, China is increasing its military capability. So is the US, which already enjoys a huge edge in military spending, technology and (crucially) in combat experience – given that in recent decades, US forces have seen combat in Vietnam, Panama, Grenada, the First Gulf War, Kosovo, Iraq, and Afghanistan. In stark contrast, Chinese troops and commanders have had experience with only a couple of border conflicts with its neighbours (India and Vietnam) over the same period.

Meaning: despite the coalition government’s spending spree on Defence there is no genuine reason to fear China’s military capability. It isn’t a legitimate justification for spending our scarce billions in order to deter a risk that isn’t real, and to defend trade interests that are not in jeopardy.

Balances of Power

That’s not just my opinion. There is this 2025 report from the Rand think tank entitled The Chinese Military’s Doubtful Combat Readiness. I’ll try to keep this brief, but China’s military is simply not in the same league as the United States, let alone of any coalition of the West’s traditional allies. Why? One reason is that since the end of the Cold War, the United States has spent over $19 trillion on its military, which is $16 trillion more than China has spent during the same period. For 2025, China’s annual military budget is $246 billion. In March 2024, the Pentagon’s budget request to Congress for 2025 was $849.8 billion.

These massive imbalances have enabled the US to develop and maintain several huge military bases (Guam, Okinawa, Camp Humphreys in South Korea etc) in close proximity to China. From these bases the US can deploy far more sophisticated weaponry. Given that any war in the Indo-Pacific region with China would (initially) involve sea/air conflict, it is significant that the same vast gaps in military capability apply there as well.

For example: the US Navy operates 11 carrier groups. As of March 2025, China has three, with a fourth under construction. As recently as 2022, it reportedly lacked the trainer jet needed to train pilots to fly planes off any of them. Yes, China has big military forces. Keep in mind that, at the time of the First Gulf War, Iraq had the fourth-largest military in the world, full of seasoned veterans from the 1980s war with Iran. Yet the Iraqi military was quickly decimated by the United States forces.

Currently, China is estimated to be the world’s fifth largest military power, behind the US, Russia, Japan and France. Beijing is well aware of what happened to Saddam Hussein’s military during the First Gulf War. To repeat: China is not in the same league in either nuclear or conventional weaponry as the United States, and those imbalances will not change in the foreseeable future.

Spend it at home

There is no existential threat to this country’s survival emanating from China. Among other things, China has little or no capacity to project its military capability much beyond its shores in any meaningful way. That should mean that there is no urgent security or economic rationale for us spending hugely on Defence, other than to avoid getting in the bad books of Donald Trump and the traditional military establishments in the UK and Australia.

To gain a few imaginary brownie points in Washington and Canberra, we are prepping to spend vast sums on the arms industry, even though the supply and deployment of much of this hardware will always be at the whim and pleasure of Donald Trump and his successors. To do so, we will continue to starve our public health system and leave the growing numbers of homeless to fend for themselves. If we bind ourselves as closely to Australia as the DCP advocates, we will also put ourselves at greater risk of being dragged along into their force projection adventures close to, and beyond, China’s borders.

Apparently, we will have to wait until May’s Budget to see the financial costs and trade-offs more clearly. Yet we already know that we don’t have a spare $9 billion kicking around in the government’s books. So we will have to borrow much of it. We can afford to. Our government debt is ludicrously low, by world standards.

But here’s the thing. These are choices, not givens. We chose to borrow for tax cuts. We are choosing to borrow for new weaponry. At the same time, the government is refusing to borrow to end child poverty, or to build the extra state housing we need, or to fix a failing public health system, or to give sick people the care and treatments they need and deserve.

The values reflected by those choices are surely not what our service men and women fought for, and died to defend in the past.

Footnote: Small point of comparison: the old version of the school lunch programme was budgeted at $240 million to feed some 250,000 kids. In the DCP, the indicative cost of improving the “Accomodation Messing and Dining” experience of a stunningly smaller number of NZDF staff is estimated to be between $100-300 million. No word yet on the average cost per lunch.

Gentle and Genial

What with this crossfire on tariffs and willingness to spend whatever it takes to get the tools of “enhanced lethality”... maybe some quiet, soothing music would be a welcome balm to the senses. From 60 years ago and out of the backblocks of northern Brazil, here’s Los Indios Tabajaras with their wondrous, one hit wonder “Maria Elena”: