China’s Restrictions on Rare Earth Elements: A Strategic Challenge to Western Defense Supply Chains

By IndraStra Global Editorial Team

The global defense industry, particularly in the United States, is facing a mounting crisis as China tightens its grip on the supply of critical minerals essential for military production. From rare earth elements (REEs) used in drone motors to germanium integral to infrared sensors, China's dominance over these materials has created a chokehold on Western defense supply chains. This development, driven by Beijing's export controls, has led to production delays, skyrocketing costs, and a scramble for alternative sources, exposing the vulnerabilities of the U.S. military's reliance on Chinese suppliers. With tensions between the U.S. and China heating up, the implications of these restrictions extend beyond economics, raising questions about national security and the feasibility of reducing dependence on a geopolitical rival. If not addressed, this issue could have long-term consequences for the U.S. defense industry, potentially compromising its strategic capabilities and global influence. 
Until 2023, China, which processed approximately 90% of the world's rare earth elements (REEs) and dominated the production of other critical minerals like germanium, gallium, and antimony, had a significant impact on the U.S. defense industry. These materials are indispensable for manufacturing a wide range of defense equipment, including microelectronics, night-vision goggles, missile-targeting systems, and defense satellites. The implementation of stringent export controls on REEs by Beijing earlier this year, amidst escalating trade tensions with the U.S., has had a profound effect. Although some restrictions were eased in June following trade concessions from the Trump administration, China has maintained tight limits on minerals designated for defense purposes. Since December 2024, it has outright banned sales of germanium, gallium, and antimony to the U.S., materials critical for applications such as hardening lead bullets and enabling night-vision capabilities. 
The impact of these restrictions is not just theoretical; it is immediate and measurable. A U.S.-based drone-parts manufacturer supplying the military delayed orders by up to two months while searching for non-Chinese sources of rare-earth (RE) magnets. The cost of certain minerals has surged, with samarium, used in high-temperature magnets for jet-fighter engines, recently offered at 60 times its standard price. Other materials now command prices five times higher than before the restrictions, according to industry traders. These price increases are driving up the cost of defense systems, straining budgets, and complicating procurement for suppliers and defense executives. 
The dependency of the U.S. military on Chinese minerals is stark. Data from Govini, a defense software firm, indicates that over 80,000 parts in Pentagon weapons systems rely on critical minerals subject to Chinese export controls. Nearly all supply chains for these minerals involve at least one Chinese supplier, making disruptions widespread when Beijing tightens restrictions. For instance, Chinese regulators now require extensive documentation from companies importing REEs, including product images and production line photos, to ensure the materials are not used for military purposes. One Western supplier of RE magnets reported that its requests for imports were approved for civilian applications but rejected or delayed for defense and aerospace uses. 
This scrutiny has tangible consequences. ePropelled, a New Hampshire-based company producing propulsion motors for drones, faced demands from its Chinese magnet supplier for detailed product drawings, buyer lists, and assurances that the magnets would not be used for military purposes. "Of course, we are not going to provide the Chinese government with that information," said Chris Thompson, ePropelled's vice president of global sales. As a result, the supplier paused shipments, forcing ePropelled to delay customer orders by one to two months, doubling its usual delivery times. The company turned to alternative suppliers in the U.S., Europe, Japan, and Taiwan, but even these vendors often rely on Chinese REEs, underscoring the difficulty of escaping Beijing's influence. 
The defense industry's vulnerability is particularly acute for smaller players like drone manufacturers, many of which are startups with limited resources and supply-chain expertise. These companies play a crucial role in the defense ecosystem, often providing innovative solutions and contributing to the diversity of the supply chain. Unlike larger defense contractors, these companies usually lack the stockpiles or financial capacity to weather prolonged disruptions. "I can tell you…We talk about this daily, and our companies talk about it daily," said Dak Hardwick, vice president of international affairs at the Aerospace Industries Association. The situation is compounded by the niche nature of some minerals, which industry executives say cannot be economically produced outside China. Leonardo DRS, a U.S. defense firm, is down to its "safety stock" of germanium, with CEO Bill Lynn warning that "to sustain timely product deliveries, material flow must improve in the second half" of 2025. Germanium is critical for infrared sensors used in missiles, and the company is exploring ways to diversify its supply chain or replace the material entirely. The challenges faced by these smaller players underscore the need for collective action to address the supply chain issue and ensure the resilience of the defense industry. 
The Pentagon has recognized the severity of this dependency and is taking proactive steps to address it. By 2027, defense contractors will be required to stop purchasing RE magnets containing Chinese-sourced minerals, a mandate that has prompted some companies to build stockpiles. However, these reserves are often limited, with many suppliers holding less than a year's worth of critical minerals, and some as little as a few months. To bolster domestic production, the Department of Defense has allocated grants, including $14 million last year, to a Canadian company to produce germanium substrates for defense satellite solar cells. In July, the Pentagon made a significant investment, agreeing to pay $400 million for preferred stock and a warrant in MP Materials, the operator of the largest rare-earths mine in the Americas. This deal, described by Lockheed Martin CEO James Taiclet as "groundbreaking," aims to secure a supply of magnets for F-35 jet fighters and cruise missiles, though scaling up production will take time. These efforts demonstrate the U.S. government's commitment to national security and the resilience of the defense supply chain. 
Even with all these efforts, becoming truly self-sufficient is still a tough road. MP Materials and other startups like Vulcan Elements in North Carolina and USA Rare Earth in Oklahoma are working to increase domestic production, but their supplies will not be available until at least the end of 2025. Even then, these companies must contend with China's dominance over the raw minerals needed for magnet production. Metal traders report that China's requirement to know the end user of RE magnets has stifled their ability to stockpile, as licenses for such activities are rarely approved. This bottleneck exacerbates shortages and limits the industry's ability to buffer against disruptions. 
The strategic implications of China's actions were vividly illustrated in an incident involving United States Antimony Corporation. Earlier this year, the company attempted to ship 55 metric tons of antimony mined in Australia to its smelter in Mexico via the Chinese port of Ningbo, a previously routine practice. In April, Chinese customs detained the shipment for three months, prompting the company to seek assistance from the State Department and the White House. The shipment was released in July, but only on the condition that it be returned to Australia rather than sent to the U.S. Upon arrival, the company discovered that product seals had been broken, raising concerns about tampering or contamination. "The shipping company, everyone who was involved, they'd never seen this happen before," said CEO Gary Evans. 
This incident highlights the extent to which China is willing to flex its control over critical minerals to assert geopolitical leverage. By detaining shipments and imposing stringent export requirements, Beijing can disrupt Western defense production while maintaining plausible deniability, as the restrictions are framed as regulatory measures rather than overt aggression. The lack of clarity from Beijing only reinforces how difficult it is for the West to navigate China's shifting policies and hidden intentions.
The Pentagon's efforts to diversify supply chains are a step toward mitigating these risks, but they face significant hurdles. The Critical Minerals Forum, established last year, aims to spur domestic and allied production of materials like antimony and germanium, but building new mines and processing facilities is a slow and capital-intensive process. Major defense contractors are beginning to take matters into their own hands, using their market power to secure alternative sources of critical minerals. "They recognize that they're just not going to get the magnets, no matter what happens, unless they get involved," said Nicholas Myers, CEO of Phoenix Tailings, a Massachusetts startup producing rare-earth metals. However, smaller companies, particularly in the drone sector, lack the resources to pursue such strategies, leaving them disproportionately exposed to supply chain disruptions. 
The broader economic and security implications of China's mineral restrictions cannot be overstated. As costs rise and production delays mount, the U.S. military's ability to maintain its technological edge is at risk. The reliance on Chinese suppliers for over thousands of components in Pentagon weapons systems creates a vulnerability that Beijing can exploit at will, particularly during periods of heightened geopolitical tension. While the Pentagon's investments in domestic production and partnerships with allied nations are promising, they are not immediate solutions. The timeline for scaling up alternative supplies stretches into years, while the defense industry faces immediate shortages that threaten its operational readiness. 
Moreover, the restrictions highlight a deeper strategic challenge: the U.S. and its allies must balance the need for economic interdependence with the imperative of securing critical supply chains. China's actions serve as a reminder that access to essential resources can be weaponized, forcing Western governments and companies to rethink their approach to global trade. The Pentagon's investment in MP Materials and its grants to other producers signal a commitment to reducing this dependency, but the scale of the challenge requires a coordinated, long-term effort across government and industry. 
Meanwhile, contractors are under pressure—coping with cost hikes, shipment setbacks, and significant supply chain uncertainty. Smaller firms, in particular, face existential risks if they cannot secure reliable access to critical minerals. The incident with United States Antimony Corporation illustrates the lengths to which China is willing to go to enforce its export controls, raising concerns about the reliability of global shipping routes and the integrity of supply chains. In trying to build a tougher, more independent defense system, the U.S. must acknowledge that its current dependence on China for critical minerals is a liability that Beijing is all too willing to exploit. 
What's needed next is a careful mix of acting fast and thinking long-term. Investments in domestic production, partnerships with allied nations, and innovation in material substitution are critical steps. Still, they must be paired with efforts to diversify supply chains and reduce reliance on adversarial suppliers. For now, the defense industry must contend with the immediate consequences of China's restrictions, from delayed drone deliveries to inflated costs for jet-fighter components. With so much at risk and little time to spare, the U.S. is racing to secure the critical minerals behind its military strength.

The op-ed article was based exclusively on information from the Wall Street Journal, published on August 3, 2025, titled "China Is Choking Supply of Critical Minerals to Western Defense Companies."

IndraStra Global is now available on
Apple News, Google News, Feedly, Flipboard, and  WhatsApp Channel

COPYRIGHT: This article is published under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License. https://creativecommons.org/licenses/by-nc-nd/4.0/

REPUBLISH: Republish our articles online or in print for free if you follow these guidelines. https://www.indrastra.com/p/republish-us.html