When it comes to Donald Trump’s China policy, there is, as journalist Thomas Friedman puts it, a “method to his madness” but also “madness to his method.” Trump was right to single out China a challenge facing the U.S., and he showed more courage than his predecessors in confronting China on policies that violate global norms. But his tariffs and tariff threats have, in many cases, been counterproductive, inflicting as much pain on the U.S. as on China.

So what would a more sane U.S. policy look like? Well, first of all, it would include offense, as well as defense. That’s the message of a new report out this morning from a group assembled by the Council on Foreign Relations, entitled Innovation and National Security. The group was chaired by retired Admiral William McRaven and McKinsey’s James Manyika, and included ex-Google CEO Eric Schmidt, investor Jim Breyer, former DARPA head Regina Dugan, investor Reid Hoffman, Berkeley business professor Laura Tyson, and more. Its conclusion: U.S. leadership in innovation is at risk, and “the government and the private sector must undertake a comprehensive and urgent response” to retain it.

A few of its recommendations:

• Restore federal R&D to its historical average—$80 billion more than it is today.
• Take a “moon shot” approach to key challenges: AI and data science, battery storage, 5G, synthetic biology, etc.
• Target debt forgiveness for students in key technology disciplines.
• “Staple a green card” to the degrees of overseas students in key technology disciplines.
• The report also suggests some selective defense measures, including a targeted effort to stop the theft of scientific knowledge from U.S. universities. And it calls for new international alliances to set global standards for the monitor and control of emerging technologies.

You can read the full report here. Absent a war—or imminent threat—national planning has never been America’s strong suit. But the current moment in history may call for a change. “Faced with the rise of China and a new wave of disruptive technological innovation…the United States must once again make technological preeminence a national goal.”

News below.

Alan Murray
alan.murray@fortune.com
@alansmurray

TOP NEWS

Israel Elections

As pollsters warned might happen, the results of Israel's repeat election are so close as to leave neither right-wing nor centrist blocs with a workable majority. Let the horse-trading begin. Bloomberg

Overnight Borrowing

The New York Federal Reserve stepped in yesterday with an "overnight repo operation" designed to ease pressure in the markets, which had experienced a sudden spike in overnight borrowing rates. The $53 billion injection into the system was the first of its kind to be deployed by the NY Fed since 2008. CNN Business

FedEx Outlook

FedEx expects a 16%-29% fall in EPS during the current fiscal year, thanks to the costs of expansion, the general economic malaise, and a drop in revenue associated with its cutting of ties with Amazon. FedEx's fiscal first-quarter profits were down 11%, with its Express unit showing particular weakness. Its shares fell 10% on the results. Fortune

Oil Supply

The Saudis are promising to have their oil supply back online by the end of the month, and claim to have already restored half the production loss caused by drone attacks. As a result, the oil price has fallen by 5%. CNBC

AROUND THE WATER COOLER

Cobham Takeover

The U.K. government is intervening in the takeover of local defense firm Cobham by U.S. private equity outfit Advent International, on the grounds of national security. The move means the British Competition and Markets Authority will now probe the implications of the $5 billion deal. BBC

Calvey Case

Russian media are reporting that the country may drop its controversial embezzlement case against Baring Vostok executives including American investor Michael Calvey. Investigators apparently now think there's a lack of evidence to support the plaintiff's complaint. Moscow Times

Rentier Capitalism

The Financial Times' Martin Wolf has written a diatribe against "rentier capitalism" that includes this warning: "Members of the Business Roundtable and their peers have tough questions to ask themselves. They are right: seeking to maximize shareholder value has proved a doubtful guide to managing corporations. But that realization is the beginning, not the end. They need to ask themselves what this understanding means for how they set their own pay and how they exploit—indeed actively create—tax and regulatory loopholes." FT

Taiwan Diplomacy

U.S. Vice President Mike Pence has cancelled a planned meeting with the leader of the Solomon Islands, after the country switched allegiance from Taipei to Beijing. Washington said it was "disappointed" by the move. Taiwan now has just 16 diplomatic allies. South China Morning Post

This edition of CEO Daily was edited by David Meyer. Find previous editions here, and sign up for other Fortune newsletters here.