US Executive Order to Block Critical Mineral Supply Chains from China and the Goal of Resolving Dependency by 2027: Structural Implications and South Korea's Strategic Response

Executive Summary

The Trump administration's second term, through an executive order signed on July 28, 2026, requires defense contractors to transition their supply chains for critical minerals such as rare earths, tungsten, and molybdenum away from routes linked to China, Russia, Iran, and North Korea starting January 2027. This signifies a structural turning point where the US-China competition for technological and resource hegemony is expanding to a new front: supply chains. However, considering the structural shortage of mining and processing infrastructure within the US and China's decades-long technological advantage, the most realistic scenario (with an approximately 55% probability) is that the deadline of 2027, while officially maintained, will see practical implementation delayed through repeated waivers. The US is institutionalizing a supply chain control mechanism with nine countries through the Alliance for Resource Trade (ART) framework, multilaterally expanding its encirclement of China. Therefore, allies, including South Korea, must position themselves not as passive recipients of norms but as active participants in supply chain restructuring. South Korea should seek to become a hub for the allied critical mineral network, starting with the restart of the Yeongwol tungsten mine, while proactively securing technological sovereignty in advanced rare earth functional materials, where China is vulnerable, thereby transforming supply chain restructuring into an opportunity for strengthening national competitiveness.

I. Issue Situation Analysis

US Executive Order to Block Critical Mineral Supply Chains from China and the Goal of Resolving Dependency by 2027

Issue Situation Analysis

1. Background and Progress of the Issue

Critical minerals such as rare earths, tungsten, and molybdenum are strategic materials that form the backbone of modern defense and advanced industries, including electric vehicle motors, advanced weapons guidance systems, and semiconductor manufacturing. China has held an absolute advantage in the global supply chain, accounting for over 60% of global rare earth production, and this structural asymmetry has directly led to vulnerabilities in US security [2]. The precedent of China using critical minerals as a tool for diplomatic pressure dates back to the 2010 Senkaku (Diaoyu Islands) dispute, when it restricted rare earth exports to Japan. Since then, the weaponization of resources has evolved in increasingly sophisticated ways amidst intensifying US-China strategic competition [2].

While the Trump administration's first term focused on tariffs and export controls to pressure China, the Biden administration pursued a more structural economic security policy that combined supply chain restructuring, industrial subsidies, and export controls [5]. However, the Trump administration's second term has shifted this towards a more aggressive and accelerated direction. Since regaining office, President Trump has made decarbonizing the critical mineral supply chain a top priority, focusing on expanding domestic supply bases by investing tens of billions of dollars in approximately 150 mining and processing companies [1]. Despite these efforts, the administration has repeatedly granted waivers due to domestic supply not keeping pace with demand, starkly illustrating the persistent gap between policy intentions and industrial realities [1].

In line with this trend, on July 28, 2026, President Trump signed an executive order directing the blocking of critical mineral supply chains linked to China for defense purposes. This order requires defense contractors to transition their supply chains for minerals such as rare earths, tungsten, molybdenum, and tantalum away from routes connected to China, Russia, Iran, and North Korea by January 2027 [4]. While the executive order does not explicitly name China, its phrasing, such as the need to "maintain America's military edge in an era of great power competition" and to "protect supply chains from physical, cyber, and economic disruption," clearly indicates that it is effectively targeting China [4].

2. Current Situation

Since the signing of the executive order, questions have been raised within the US industry and among experts regarding the feasibility of the January 2027 deadline. Domestic mining and processing infrastructure is currently insufficient to meet defense industry demand, and industry insiders widely agree that structural expansion of the supply base is difficult to achieve in the short term, despite billions of dollars in government investment [1]. In particular, rare earth processing requires much more complex chemical processes than mining, and China's decades-long technological and industrial advantage in this area is identified as a key obstacle that cannot be easily overcome with simple financial investment.

This executive order should be understood not in isolation but as part of the US's broader strategy to pressure China's supply chains. On the same day, the US Federal Communications Commission (FCC) announced a ban on new imports of Chinese-made humanoid robots, quadruped robots, and power inverters connected to renewable energy and data center equipment. This aims to protect US AI supply chains from Chinese data theft and cyberattacks while encouraging the reshoring of manufacturing to the US [7]. Thus, the US's strategic intent to comprehensively block China-linked supply chains, from critical minerals to AI infrastructure, is being materialized simultaneously on multiple fronts.

Meanwhile, the US is pressuring Mexico to impose Section 232 tariffs on Chinese steel and aluminum. This aims to maintain preferential treatment for North American steel within the US-Mexico-Canada Agreement (USMCA) while establishing a common external barrier against Chinese steel [10][12]. China's state-run Global Times strongly criticized this measure as "blatant trade coercion and a violation of WTO rules," stating that it would undermine Mexico's manufacturing competitiveness [10]. Concurrently, the US has signed so-called "Alliance for Resource Trade" (ART) agreements with nine countries, including Argentina, Cambodia, Indonesia, Malaysia, and Taiwan. Through seven mechanisms such as excluding forced labor, restricting trade with third countries, and aligning export controls, the US is institutionalizing supply chain controls targeting China even outside its borders [6].

3. Key Actors and Positions/Interests

US Trump Administrationviews this executive order as the legal basis for decarbonizing critical minerals. The administration's logic aligns with its strategy of realigning alliances by linking economy and security. As Treasury Secretary Scott Bessent stated, "tariffs should be used as a tool of foreign policy and national security" [13], blocking critical mineral supply chains is not merely industrial policy but a core pillar of its security strategy to counter China. However, the administration itself recognizes the limitations of supply realities, leading to the structural contradiction of repeated waivers [1].

US Defense Contractors and Mining/Processing Companiesare caught in a double bind. While expanding supply bases with government funding, the industry frankly assesses that the January 2027 deadline is practically impossible to meet. They are essentially basing their business plans on the assumption of continued waivers or deadline extensions [1].

Chinastrongly opposes this move, characterizing it as an attempt by the US to exert hegemonic control over supply chains. State-run media, including the Global Times, criticize the US pressure on Mexico to impose tariffs on Chinese steel as "blatant trade coercion violating WTO rules" [10]. China continues to use its rare earth export control card as a countermeasure. Indeed, China has twice effectively imposed a complete ban on exports of high-performance magnet materials such as dysprosium and terbium to Japan since 2025 [2], which is also interpreted as a warning message to US allies.

Mexicois open to accepting the US pressure for tariffs on Chinese steel within the broader context of USMCA renegotiations [12]. Given Mexico's structural dependence on the US, with over 80% of its total exports directed there [8], it is difficult for Mexico to completely reject US demands. However, the negative impact of blocking Chinese steel imports on its own manufacturing competitiveness cannot be ignored, making complex interest coordination unavoidable during negotiations.

Japanis pursuing a multifaceted supply chain diversification strategy, including launching rare earth recycling initiatives, investing in processing startups based in allied countries, and strengthening critical mineral diplomacy with India and Australia, as it has been directly affected by China's rare earth export controls [2]. However, the East Asia Institute assesses that "there are clear limitations to structurally replacing Chinese dependency in the short term" [2], suggesting that Japan shares a similar structural dilemma with the US's 2027 goal.

4. Summary of Key Issues

The key issues in this matter can be summarized across three dimensions.

First, the gap between policy intent and supply realityis a problem. Despite the US government setting a specific deadline of January 2027, domestic mining and processing infrastructure is significantly insufficient to meet defense demand, and this gap cannot be easily closed in the short term [1]. Repeated waivers undermine policy credibility and sow uncertainty among allies regarding the US's commitment to supply chain restructuring.

Second, the acceleration of resource weaponization and supply chain fragmentationis an issue. The US's blocking of critical minerals from China and China's rare earth export controls are mutually stimulating, intensifying supply chain fragmentation. The analysis that "the probability of short-term resolution of the Sino-Japanese conflict through diplomatic negotiation is only 20%, and the basic scenario of gradual supply chain fragmentation due to persistent structural tensions is the most realistic outlook with a 55% probability" [2] applies similarly to the US-China conflict over critical minerals.

Third, the externalization of supply chain control to third countriesis an issue. Through the seven mechanisms of the ART agreement and pressure on Mexico to impose tariffs on China, the US is institutionalizing supply chain controls targeting China even outside its own borders [6][10][12]. This intensifies the structure where third countries are forced to choose between the US and China, acting as a key factor that exacerbates the strategic dilemma for countries like South Korea, Japan, and Southeast Asian nations that must maintain economic ties with China while simultaneously upholding security alliances with the US.

II. In-depth Issue Analysis

US Executive Order to Block Critical Mineral Supply Chains from China and the Goal of Resolving Dependency by 2027

In-depth Issue Analysis

1. Root Cause Analysis of the Issue

The root cause of this executive order should be understood not merely as a competition for resource acquisition, but as a structural outcome of the US-China competition for technological and military hegemony expanding to a new front: supply chains. Critical minerals are not only raw materials with economic value in themselves but also possess the characteristics of security assets, as they are essential inputs that cut across future strategic industries such as advanced weapons guidance systems, electric vehicle motors, and semiconductor manufacturing processes [2]. The fact that China accounts for over 60% of global rare earth production signifies a vulnerability where the US defense industry is structurally dependent on the supply decisions of a potential adversary [2].

Several factors have converged to transform this vulnerability into a policy crisis. First, the COVID-19 pandemic empirically demonstrated the potentially fatal consequences of relying on a single point of origin for global supply chains, raising awareness that the same logic applies to critical minerals [5]. Second, China's effective ban on exports of high-performance magnet materials like dysprosium and terbium to Japan since 2025 vividly demonstrated to allies that rare earths are indeed functioning as tools for geopolitical pressure [2]. Third, from the perspective of the Trump administration's political economy, there is a prevailing perception, as diagnosed by White House Council of Economic Advisers member Scott Myron, that the US has borne excessive costs in providing security and economic public goods [13]. Supply chain restructuring and tariff pressure are being simultaneously employed as means to rectify this situation.

Ultimately, this executive order is the result of the US converging its security imperative to "maintain military edge in an era of great power competition" with domestic political demands for manufacturing revival and trade deficit correction, all channeled through the single policy instrument of critical mineral supply chains [4]. This aligns precisely with the Trump administration's second term foreign policy stance of linking security and economy to exert simultaneous pressure on both allies and competitors [13].

2. Structural Context

Political Structure: The Trump administration has made countering China its top foreign policy priority and is employing a strategy of exerting simultaneous pressure on both allies and competitors by linking security and economy [13]. The executive order's use of the phrase "protect supply chains from physical, cyber, and economic disruption" without explicitly naming China is a strategic linguistic choice characteristic of the administration, minimizing the possibility of legal disputes while clearly conveying the political message [4]. Furthermore, the Trump administration is multilaterally expanding its encirclement of China by incorporating seven supply chain control mechanisms—such as excluding forced labor, restricting trade with third countries, and aligning export controls—into the agreements signed with nine countries, including Argentina, Cambodia, Indonesia, Malaysia, and Taiwan, under the Alliance for Resource Trade (ART) [6]. This demonstrates that the critical minerals executive order is not merely a domestic procurement policy but part of a larger geopolitical architecture that links supply chain restructuring with allies.

Economic Structure: The US dependency on China's manufacturing supply chains is among the highest of major competitors [5], and the perception that this structural asymmetry directly leads to security vulnerabilities is the starting point for policy formulation. Although the Trump administration has invested tens of billions of dollars in approximately 150 mining and processing companies since regaining office [1], the reality that rare earth processing requires much more complex chemical processes than mining, and that China's decades-long technological and industrial advantage cannot be easily replaced by simple financial investment in the short term, acts as a key obstacle to policy implementation. Consequently, the administration has repeatedly granted waivers [1], demonstrating that the gap between policy intent and industrial reality remains significant. Simultaneously, the US is linking the blocking of critical mineral supply chains with measures to prevent circumvention in the steel and metals sector by pressuring Mexico to impose Section 232 tariffs on Chinese steel [10][12].

Security Structure:The de-Sinicization of the defense industry supply chain is being framed not merely as economic diversification, but as a security imperative to ensure the continuity of military operations during wartime or crises. The executive order directly targeting defense contractors signifies the state's intention to control the defense industry supply chain directly, rather than leaving it to autonomous adjustments in the private market [4]. Coupled with this, the Federal Communications Commission's (FCC) announcement prohibiting the import of Chinese humanoid robots, quadruped robots, and power inverters [7] demonstrates that the disruption of critical mineral supply chains is closely linked to a broader technological security architecture, including AI infrastructure protection, cybersecurity, and energy grid security.

3. Comparison with Historical Precedents and Similar Cases

The weaponization of critical minerals is not a new phenomenon. The most direct precedent is China's de facto blockade of rare earth exports to Japan during the 2010 Senkaku (Diaoyu Islands) dispute [2]. China's actions at the time served as a catalyst, impressing upon the international community the geopolitical risks of resource dependency and marking the starting point for Japan, the United States, and the EU to earnestly pursue supply chain diversification strategies. However, while the shock of 2010 ended as a temporary policy concern, China's subsequent complete cutoff of supplies of high-performance magnetic materials such as dysprosium and terbium to Japan in 2025 [2] indicates that the weaponization of resources has become institutionalized as a geopolitical tool for China, rather than being a one-off event.

The U.S. response also becomes clearer when compared with historical precedents. During the Cold War, the U.S. established a multilateral regime called COCOM (Coordinating Committee for Multilateral Export Controls) to block technology transfers to the Soviet bloc. The Trump administration's current approach similarly employs a multilateral encirclement strategy, drawing in allies. However, it differs from COCOM in its preference for conditional pressure through bilateral agreements (ART) rather than institutional foundations [6]. Furthermore, similar to how the U.S. elevated energy security to a core national strategy and introduced the Strategic Petroleum Reserve (SPR) system after the 1970s oil shocks, current critical mineral policies reflect a paradigm shift that redefines resource security as a core component of national security.

Meanwhile, the U.S. pressure on Mexico to impose Section 232 tariffs on Chinese steel [10][12] can be seen as a modern variation of the U.S.-Japan Semiconductor Agreement (1986), where the U.S. regulated market share and prices through bilateral agreements to curb Japan's semiconductor industry in the 1980s. At that time, the U.S. forced industrial policy changes even upon an ally like Japan, a structural similarity to the current Trump administration's demand for allies to join the supply chain blockade against China.

4. Key Variables in Issue Development

The key variables that will determine the future development of the issue can be identified across four main dimensions.

First, the speed of expansion of the domestic U.S. supply base.The core variable for policy feasibility is whether domestic mining and processing infrastructure can be expanded to meet defense industry demand by the deadline of January 2027. The common assessment in the industry is that structural transformation in the short term is difficult [1]. Given the administration's precedent of repeatedly granting exemptions, an extension of the deadline or phased implementation cannot be ruled out. Notably, the fact that mineral agreements with the Democratic Republic of Congo (DRC) have not yielded expected results [14] raises questions about the overall effectiveness of strategies to secure alternative supply sources.

Second, whether China will strengthen retaliatory export controls.China has already demonstrated its willingness to weaponize resources through its 2025 rare earth export cutoff to Japan [2]. If the U.S. executive order leads to a substantial supply chain transition, it is highly probable that China will impose additional export controls on the U.S. or its allies, which could lead to price surges and supply instability in the global critical minerals market, making policy objectives even harder to achieve.

Third, the level of cooperation among allies.The Trump administration is demanding that allies join the supply chain blockade against China through ART [6], but each country's economic dependence on China and domestic political constraints will determine the depth of cooperation. Japan, in particular, is already pursuing its own supply chain diversification strategy [2], but it is assessed that there are clear limitations to structurally replacing its dependence on China in the short term. The extent to which key allies such as South Korea and the EU respond to the U.S. demands will determine the effectiveness of the encirclement strategy against China.

Fourth, the existence of negotiation channels between the U.S. and China.Despite the executive order containing stringent supply chain blockade measures, the extent to which the U.S. and China maintain negotiation channels in the critical minerals sector in any form will act as a variable determining the level of escalation of the issue. As Treasury Secretary Scott Bessent stated, "tariffs should be used as a tool of foreign policy and national security" [13], the Trump administration's tough measures also carry a tactical positioning aspect to enhance negotiation leverage, making it difficult to completely rule out the possibility of future bilateral dialogue between the U.S. and China.