FARNBOROUGH and WASHINGTON — Amidst industry concerns that a new executive order on critical minerals has an unrealistic timeframe, a key Pentagon official is saying the department is prepared to work with companies — as long as they are making a good-faith effort to comply with the order.
“What we need to do is commit to companies to say, ‘Look, how are you going to go ahead and resolve this problem through friendshoring, through domestic shoring, through changes in suppliers?” Michael Cadenazzi, the assistant secretary of defense for industrial base policy, told Breaking Defense Wednesday on the sidelines of the Farnborough Airshow.
“And if there’s a gap, a legitimate gap, [and] you have a plan and you need a window to see you through [to] bridge that gap, that’s what we want to know,” he added. “But it’s about the plan, it’s about the mitigation plan for the long haul.”
Cadenazzi’s comments came two days after the White House released a new executive order essentially giving companies until the start of 2027 to stop using critical materials and minerals from Russia, Iran, North Korea and most notably China.
More specifically, that EO told Defense Secretary Pete Hegseth that he has six months to craft policy and implementation guidance requiring all prime contractors and subcontractors to map out and trace “all components, parts, equipment, software, and materials back to the origin of raw materials in their supply chains.”
The Pentagon will then look at those “vulnerabilities, bottlenecks, and single points of failure” to map out national security risks.
“The United States must secure its supply chains against physical, cyber, and economic subversion,” the EO said. “It is the policy of the United States that not only the finished equipment deployed by our military, but also the critical materials and components necessary to manufacture, maintain, sustain, and repair that equipment, are sourced domestically or from allied nations.”
Although there are already laws in place designed to ensure such materials are sourced from domestic companies or partner nations, the department has been issuing waivers to allow US firms to buy from China or other prohibited countries. However, the EO directs the department to stop issuing such waivers on Jan. 1, 2027, unless the prime contractor submits an acceptable, “formal” mitigation plan.
Cadenazzi explained that while this transition is much needed, the White House is willing to meet contractors halfway and “work with you in the near term.”
“If [they say] ‘I need something to bridge me through until next summer,’ we want to have that conversation,” he added. “In many cases, we think there are solutions that are reasonable between friends and allies and us as we ramp up investment.”
While the EO provides wiggle room during this transition, there are concerns from industry that the move is going to take time, money and, possibly, pose a national security risk.
For example, the Aerospace Industries Association (AIA) warned this week that the EO could “impede” efforts to strengthen supply.
“For several of the minerals identified, domestic sources either do not exist today, or the US lacks the capacity, scale, or purity requirements needed to meet demand,” AIA wrote. “There are more workable approaches that will advance supply chain security and avoid unnecessary disruptions on companies that support our national defense, equip our warfighters with critical capabilities, and meet national security requirements.”
Over in Farnborough, former Army secretary and AIA head Eric Fanning added that companies should always be assessing their supply chain sources but noted that it took decades to get where the US is today and the reality is there is a dependence on China.
“It will take time to get past that [but] the EO is…an unrealistically tight time frame without a lot of exceptions allowed,” he told Breaking Defense, adding that while the aerospace industrial base is big, it can only move the critical minerals market so much.
“The defense industry, as big as it is, doesn’t source enough of these critical minerals that private capital will swoop in to create a domestic supply source for it,” Fanning said. “There won’t be a return on their investment to do that. This is going to take a government industry partnership to figure this out, and there’ll have to be some government investment to do this.”
Courtney Weatherby — Stimson Center’s deputy director for Southeast Asia and its energy, water and sustainability programs — said that while there’s a lot of “potential good” that could come from this EO in terms of understanding gaps and opportunities for securing the supply chain, it’s a big shift and ask on a tight timeline.
From her vantage point researching the critical minerals mining sector and processing inside Southeast Asia and China, it could be tricky and time-consuming for defense companies to fully map out the supply chain for multiple reasons. Even if the critical minerals are mined in one country, they often end up in China for processing and are then mixed with minerals from second and third sources, essentially making it a “black box” of information.
“My anticipation is that [defense companies are] going to run into some roadblocks where they can trace back to a company, they might even be able to trace back a few companies into the chain. But once you get to sort of a refining or processing point where the original source materials are mixed in, then it is very difficult to say for sure that certain minerals did not come from mines inside China or inside Myanmar or other places,” Weatherby added.
Both Fanning and Weatherby also predicted that the EO could lead to increased costs for defense companies as they shift away from China. Why? Weatherby said not only does China have lower labor costs than the US and many other countries, but it already has the processing and equipment in place, and establishing that elsewhere takes time and money.
In recent months, the Trump administration has inked a series of rare earth mineral deals and loans with various companies to help shore up the domestic industry — with the Pentagon even taking an equity stake in MP Minerals last year. When asked about the sheer cost associated with moving away from China, Cadenazzi said assuming a price hike is “debatable in some cases” given the lack of pricing transparency coming out of Beijing.
Regardless, he added, building up domestic capacity is worth the investment.
“That’s going to cost some money, but we think in the long term it’s better for certainly the warfighter in the department to have that, and we think macroeconomically it’s better as well,” Cadenazzi said.
Aaron Mehta in Farnborough contributed to this report.
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