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Alyssa Chen

A recent US executive order requires major arms manufacturers to trace their multi-tier supply chains and actively phase out Chinese rare earths, aiming to end years of reliance on cheap minerals from China.
Far from a radical policy shift, industry observers view the directive as a long-overdue enforcement crackdown designed to inflict short-term contractor pain for long-term national security gain.
While contractors face immediate hurdles to requalify suppliers and find non-Chinese alternatives, US analysts said the market adjustments were manageable, though delivery timetables for future military hardware could slightly stretch.
They also warned that true strategic independence needed sustained, long-term capital investment in non-Chinese midstream processing.
Signed on July 20 by US President Donald Trump, the executive order significantly tightens the conditions under which the Department of Defence can issue waivers for defence-critical imports from China, Russia, Iran and North Korea.
US defence procurement rules strictly prohibit sourcing from adversary states certain “covered materials” – ranging from rare earth magnets to newly added inputs like gallium and germanium – with exemptions available under waiver conditions.


However, because China controls about 90 per cent of global processed rare earths and two-thirds of mining capacity, the Pentagon has routinely granted waivers to keep military production lines moving.
Beginning next year, such routine exemptions will end.
Contractors seeking waivers must submit formal mitigation plans proving “exhaustive efforts” to source compliant materials, detailing explicit steps to phase out non-compliant suppliers and setting strict implementation timelines.
The order also mandates comprehensive supply-chain mapping within 180 days, requiring companies to trace components “from raw materials to end products”.
A White House statement said: “Despite long-standing prohibitions on the use of sensitive materials sourced from geopolitical adversaries, supply-chain resilience and domestic production have been historically underprioritised.”
The latest directive tells defence contractors that the era of relatively easily available waivers and the Trump administration’s repeated retreats from enforcing policies in this area is over, according to Eugene Gholz, an associate professor of political science at the University of Notre Dame.
“The executive order is about finally enforcing laws that have been on the books for a while,” said Gholz, who formerly served as senior adviser to the US deputy assistant secretary of defence for manufacturing and industrial base policy.
“It is not a major policy shift … There is a bipartisan consensus in the United States in favour of limited decoupling from China on critical materials supply.”
Cory Combs, head of supply-chain research at advisory firm Trivium China, said the order raised the bar for waivers to force technical diversification and stimulate non-Chinese supply growth.
“To the extent it works, it is designed to be ‘short-term contractor pain for long-term national security gain’,” Combs said.


Yet, implementing full supply-chain visibility presents formidable practical challenges.
Courtney Weatherby, a fellow at the Stimson Centre’s energy, water and sustainability programme, highlighted two major bottlenecks: the administrative burden of tracing deep-tier supply chains and the practical difficulty of finding feasible non-Chinese alternatives.
Weatherby said a primary obstacle on the supply side lay in China’s midstream refining, where critical minerals from disparate sources are blended into mixed batches, making it hard to trace the origin of a single raw material.
“In the short term, the informational gaps may pose challenges to companies seeking to meet requested levels of traceability,” she added.
“In the long term, it could pose challenges in terms of pricing and deliverable timelines if waivers are not approved due to potentially higher costs and lower availability of limited alternative sources.”
The move marks Trump’s latest push to cut overreliance on foreign critical materials for those used in domestic defence supply chains, especially when the US is rushing to restock ammunition drained by its war with Iran and scale up output of strategic bombers and missiles.
It comes just one month after Beijing added 10 US firms – including rare earth specialists MP Materials and USA Rare Earth – to its export control list.
Since last year, China has dramatically tightened export controls on rare earths, while Washington has complained that it is still not receiving sufficient critical mineral exports from China despite the two sides’ trade truce struck in Busan last year.
According to Mineral Commodity Summaries issued by the US Department of the Interior and the US Geological Survey, China is one of the leading foreign suppliers for several “covered materials”, including tantalum, tungsten, gallium and germanium.
The US relies entirely on imports for materials like gallium and tantalum, while its net import reliance for tungsten exceeded 50 per cent of apparent consumption in 2025.


Heavy rare earths, such as dysprosium and terbium, are vital for manufacturing high-performance permanent magnets.
These components underpin critical US defence technology, from radar arrays and missile guidance units to advanced propulsion systems.
According to Combs, “The US’ first strategic imperative is to diversify military supply chains. Despite all the political focus, commercial supply diversification is in practice a secondary and much longer-term objective.”
Amid the hurdles, Gholz said market adjustments were manageable and would not compromise current military readiness.
The main hurdle for major defence primes is that they rarely buy critical minerals directly, forcing procurement teams to trace complex, lower-tier supply chains. But he viewed this administrative audit as “manageable” within months rather than years.
Government or defence demand for many critical materials was a small fraction of overall demand, Gholz added, noting that non-adversarial suppliers could meet military needs if Washington was prepared to absorb higher costs.
“This executive order has to do with sourcing for production of weapons in the future. It also is unlikely to impact readiness. It may cause some production timelines for the future to slip, but probably not much if at all.”
Meanwhile, Weatherby said that sourcing was only half the battle, and that Beijing’s stranglehold on processing and refining techniques would require a certain scale of investment to catch up.
She argued it was unclear whether the supply-chain tracing process “will lead to long-term gain without a strategic, multi-step approach to nurture robust alternative and diversified supply chains. That will take time and investment.”
Meanwhile, Combs anticipated that the new waiver restrictions would not drive new large-scale investments, saying the defence demand alone was inadequate to set up the mining and processing infrastructure for diversification.
“Though we do expect it’ll help transfer some value from contractors to select existing non-Chinese suppliers, which will be a boost to the latter’s financial health.”


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Directive seen as a long-overdue enforcement crackdown meant to inflict short-term contractor pain for long-term national security gain


Directive seen as a long-overdue enforcement crackdown meant to inflict short-term contractor pain for long-term national security gain.


Pain or gain? US moves to decouple its defence industry from China’s rare earths

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Directive seen as a long-overdue enforcement crackdown meant to inflict short-term contractor pain for long-term national security gain

Directive seen as a long-overdue enforcement crackdown meant to inflict short-term contractor pain for long-term national security gain