Laozi says of a leader, “What he must do he does but not for glory, what he must do he does but not for show, what he must do he does but not for self. He has done it because it had to be done.”
The Taoist view is to be relatively passive and action is only taken when it is absolutely necessary. Because it is a philosophy of the individual, one would think it can be somewhat difficult to tie it to leadership. A leader himself, therefore, should not be entirely passive as a leader, but rather only force his people to do something when it is absolutely necessary for the people as a whole.
The rest of the time, people should be allowed to pursue his or her own pursuits as long as they do not interfere with another’s pursuits. It would also be pertinent that resources be committed in the smallest amounts necessary. Therefore it is possible to apply Taoism to a group of people, as you could see a community as a single entity in and of itself.
In the case of war, it is important to understand that it is just a cycle. You may win now, but one day someone will rise up and challenge you again. It is a basic fact that an act of force will eventually have a counter-force. Therefore, you must have a good reason to take action in the first place.
A Taoist is not entirely a pacifist. The question to be asked is when force can be used properly. As a Taoist leader, it is important that force is only used when all other options have failed. Even then, use as only as much force as is necessary. The most important thing of all is to avoid death whenever possible. As a leader, it is most important that the lives of others are the most sacred things of all.