This isn't entirely hypothetical. There was for example a US-German joint venture of the respectivel intelligence agencies that produced compromised encryption/

This isn't entirely hypothetical. There was for example a US-German joint venture of the respectivel intelligence agencies that produced compromised encryption/security software. The primary market were of course hostile foreign countries but the US saw no problems also selling to its allies which the German agents balked at (because after all if they openly do this that means there's no reason to believe they wouldn't also do this to Germany). Granted, infiltrating a supply chain to boobytrap devices to prep them for a coordinated act of state terrorism is a different beast from merely compromising encryption and communication but a certain level of paranoia seems warranted.