A fundamental asymmetry has emerged in the military industrial complexes of the contemporary global order. On one side is the United States and its Western allies, which underwent a process of demilitarization and industrial consolidation after the Cold War, one where quality eclipsed the quantity imperative of having to maintain perpetual readiness. On the other is competitors like Russia and China, which have retained a strong state role in their defense industries throughout. For China, this has meant cornering critical supply chains and insulating domestic industrial capacity from market forces; and for Russia, a comprehensive economic mobilization in support of the Ukraine war. The end result is a widening production gap that puts the United States and its allies at a marked disadvantage in any hypothetical great power conflict. This article examines how we got here and what it means for global geopolitics.
The Critical Minerals Squeeze
To a large extent, the vulnerabilities of the US industrial base are a consequence of China’s domination in the global extraction and refining of rare earths and other critical minerals. As discussed in a recent Geopolitics Weekly, this is down to economics. Rare earth extraction is a high-cost (labor, water, energy) and high-tech, capital intensive endeavor, and one where global price fluctuations can swiftly wipe out private players. In China, these pitfalls were paved over with active state support – targeted R&D, industrial subsidies, and lax regulation – and long-term planning, which has had the effect of hollowing out the US rare earths industry, starting in the 1990s. In the broadest sense, the critical takeaway is that the extraction and refinement of certain critical minerals only becomes feasible with active state support (regulatory and/or subsidy), especially given the present context of having to compete against consolidated Chinese players that benefit from this kind of support. Consequently, it becomes a question of political will: Does a government believe that onshore defense supply chains are worth the environmental and fiscal costs of supporting start-ups and establishing strategic stockpiles.
The recent rare earth magnets ban from China has underscored how supply chain vulnerabilities can reverberate across the US defense complex. The Javelin MANPAD, F-35 fighter jet, M1 Abrams tank, and Virginia-class submarines, to name just a few high-profile platforms, are all reliant on neodymium-iron-boron (NdFeB), 87% of whose global supply comes from China. NdFeB magnets are also a critical input in drones and radar systems.
Samarium-cobalt (SmCo) magnets represent another supply chain bottleneck, with some 50 pounds going into one F-35 alone. China dominates the both the extraction of samarium and refining of the rare earth magnet SmCo, and a 2025 US DoD report estimated approximately $3.5 billion in fiscal risk surrounding guided missile and radar equipment should there ever be a disruption of Chinese supply. Unlike other rare earths which can have applications across consumer industries, samarium (the raw input in refined SmCo magnets) is almost entirely restricted to military applications. Incidentally, concerns about the West’s dependence on externally-sourced samarium go back decades, with numerous attempts at attaining self-sufficiency ultimately collapsing in the face of regulatory or profitability concerns, and frequently in the face of (state-backed) Chinese competition.
Supply chain vulnerabilities can also be found beyond rare earths, particularly in the production of ammunition and artillery. Propellants like nitrocellulose (also known as ‘guncotton’) are an essential input in the production of artillery shells and other consumer applications. Global nitrocellulose production is more diversified compared to many rare earths; however, China enjoys an outsize weight in the market, again thanks to state-owned players such as Norinco Group. The vulnerability is particularly pronounced for Europe, which imports around 70% of its nitrocellulose from China, and relies heavily on a patchwork of small, national producers. The outbreak of the Ukraine war marked a turning point where China-based production was diverted to Russia, leaving European states struggling to source alternative supply.
