US Defense Supply Chains Still Depend on China

The COVID-19 pandemic highlighted the vulnerability of global supply chains, particularly their dependence on China, which accounts for 35 percent of global manufacturing output. While some experts consider the United States the world’s only military superpower and China the sole manufacturing superpower, the United States remains the most powerful military despite the rapid expansion and modernization of the People’s Liberation Army. However, China’s involvement in U.S. defense supply chains poses significant risks and dependencies, threatening national security.

The world has seen how the Chinese Communist Party (CCP) can leverage its control over supply chains to coerce other nations into compliance. If the United States were to go to war with China, such disruptions would be more intense and likely, particularly in the defense sector. The quickest way to disarm an enemy is to stop manufacturing their weapons.

Today, even when a product is stamped “Made in America” or “Made in” elsewhere, it is likely assembled from components manufactured in multiple countries to meet qualification standards. In 2022, the Pentagon halted F-35 fighter jet deliveries after discovering some engine starter/generator magnets were made in China. Small magnets, essential in electronics and motors, rely on rare earth minerals sourced or processed in China.

Rare earth elements (REEs) are central to the United States’s dependence on China. These 17 metals are crucial for high-tech military components like precision-guided munitions, lasers, and radar systems. China controls about 85 percent of the global REE supply, making it an indispensable player. This reliance makes the U.S. military vulnerable to potential supply disruptions from the CCP.

The U.S. defense industry heavily relies on Chinese manufacturing and assembly for components like electronic parts and semiconductors. Incorporating Chinese-made components into defense systems poses substantial cybersecurity risks, including hidden vulnerabilities or backdoors susceptible to cyber espionage or sabotage. This reliance also raises quality control issues, the potential for intellectual property theft, and supply chain disruptions. Additionally, China produces dual-use technologies, such as telecommunications equipment and software, which the military may purchase without the same monitoring or regulation as purely military technology.

Some Chinese companies often conceal their country of origin, claiming to be 100 percent American firms qualified to work for the Pentagon. This practice poses a national security risk and gives these companies an unfair advantage over genuine American companies by using subsidized parts and components from the Chinese regime. Over time, the lower prices from CCP-affiliated firms are driving American companies out of business, forcing the Pentagon to purchase Chinese-made goods.

The U.S. government has taken some steps to reduce dependence on CCP supply chains, but these measures are limited and often do not specifically target defense-related industries. Both former President Donald Trump and President Joe Biden invoked the Defense Production Act to bolster the domestic industrial base, aiming for a more secure and resilient supply chain. However, this was largely used by FEMA to target personal protective equipment (PPE), masks, and other medical devices during the COVID-19 pandemic. The 2022 U.S. National Security Strategy addresses supply chain security and identifies communist China as a threat, but it does not significantly address the specific threat China poses to U.S. defense supply chains. There has also been no comprehensive move to replace all CCP-controlled companies in U.S. defense supply chains.

This year, Biden issued Executive Order 14117 to prevent countries of concern from accessing Americans’ sensitive personal data and U.S. government-related data. This move addresses the risk posed by U.S. dependence on Chinese services and technology, which could expose such data. However, it does not reduce overall reliance on China.

The CHIPS and Science Act is a significant step aimed at strengthening the U.S. semiconductor industry by promoting domestic production and reducing reliance on foreign sources, particularly China. This act enhances the resilience and security of critical defense technology components by addressing vulnerabilities in the supply chain.

Another important initiative is the Defense Industrial Base, which aims to strengthen the resilience of the U.S. defense supply chain through strategic partnerships and investment in domestic capabilities. However, China remains a part of the U.S. defense supply chain.

The mantra “de-risking but not decoupling,” repeated by the White House, G7, and European Union, is insufficient. National security adviser Jake Sullivan told the Council on Foreign Relations in January that the United States had essentially given up hope that the CCP would reform and join the rules-based order. Instead, the United States developed a new approach—“invest, align, compete”—under Secretary of State Antony Blinken, which “sought to strengthen our competitive position and secure our interests and values while carefully managing this vital relationship.” However, this approach benefits the CCP by relying on half measures and weak, gradual actions masked as careful management of the relationship.