New executive order requires defense contractors to trace lower-tier suppliers for critical materials, pushing sourcing away from adversaries. Lockheed, Northrop, RTX, and Boeing face compliance costs and potential supply chain shifts.
President Donald Trump signed an executive order Monday that requires defense contractors to map their supply chains and shift sourcing of critical materials to suppliers in the U.S. or allied nations. The White House said the order aims to secure materials and components needed for advanced military equipment.
Trump cited a law, 10 U.S.C. 4872, that prohibits buying sensitive materials from non-aligned foreign nations. The order limits the circumstances under which the Defense Secretary can issue waivers. It also directs the Pentagon to start rulemaking requiring more detailed supply chain mapping for critical supply chains.
“America’s vulnerabilities are buried in the lower tiers: The subcontractors and vendors supplying specialty metals, electronics, chemicals, software and raw materials that Washington is not watching,” Peter Navarro, a senior trade adviser, told reporters Monday, according to Bloomberg.
Navarro said the Defense Department needs to know if a critical system depends on a foreign-controlled supplier, and that these dependencies are sometimes hidden. Reuters reported that materials can pass through dozens of suppliers before reaching the company that builds the final product.
The order is a risk event for major defense contractors. Lockheed Martin (LMT), Northrop Grumman (NOC), Raytheon Technologies (RTX), and Boeing (BA) rely on global supply chains for specialty metals, electronics, and permanent magnets. China last year limited exports of some rare earth materials and permanent magnets, Reuters reported, retaliating for U.S. tariffs.
Contractors will need to audit lower-tier suppliers, many of which are small and opaque. The order encourages them to qualify new domestic sources of critical minerals and components. The White House fact sheet said the Pentagon will propose regulatory action within 90 days.
If contractors already have domestic alternatives for critical inputs, the transition is smoother. A sudden cutoff of current supplies from adversary nations before domestic sources are ready would disrupt production. Navarro said the administration is considering additional measures.
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