While many Americans know that the United States is the world’s top spender when it comes to its military and national defense, fewer may understand where all that money goes. Military equipment, ranging from fighter jets to tanks to backpacks, is made by private companies, often called defense contractors. These companies supply our military and make sure it is ready for action at a moment’s notice. But, in today’s globally interconnected world, can our defense contractors continue producing in the event of trade disruptions?
The House Armed Services Committee wants to increase the stability of our military’s supply chains by increasing pressure on defense contractors to buy domestic parts and resources. In a released draft of the Servicemember Quality of Life Improvement and National Defense Authorization Act for Fiscal Year 2025, commonly known as the next defense appropriations bill, U.S. Representatives want the Pentagon to create a three-year plan to increase its requirements for defense contractors to buy domestic parts and resources. A major concern is that a significant chunk of U.S. military equipment is being produced with components from non-allied nations, especially China.
Military Currently Relying Heavily on Imported Resources
A second concern is that defense contractors’ industrial capacity has become eroded due to easy reliance on cheaper imported parts. Instead of making components themselves, critical defense firms are importing them. This could become a crisis during an international conflict or disaster when imports are cut off. If they are unable to import parts and are no longer accustomed to making those parts, defense contractors may not be able to assemble final goods like vehicles and weapons. This has allegedly weakened our ability to refill and maintain our National Defense Stockpile, which exists for emergencies.
Critics have argued that the outsourcing trend that began in the 1990s, with U.S. corporations moving production overseas to countries with lower labor costs and fewer regulations, affects the military and the civilian market. Of particular concern is the lack of U.S. and NATO production of rare earth minerals, which are needed for sophisticated electronics like EV batteries and microchips. Military conflicts use tremendous amounts of these minerals very quickly, and the U.S. and many NATO partners are not prioritizing their production or maintaining ready stockpiles. Hopefully, the 2025 Defense Appropriations Act will begin to change this and develop a solid foundation for producing and maintaining stockpiles of necessary defense components.
Law Could Be Big Boon for Domestic Companies
Although many defense contractors are less than thrilled about the bill, which could reduce profit margins by forcing them to buy more expensive domestic supplies, it could tremendously benefit domestic firms, from mining companies that produce rare earth minerals to small businesses that make components to go into backpacks, uniforms, and machine parts. With U.S. defense spending exceeding $800 billion annually, many funds could stimulate domestic businesses instead of foreign suppliers. However, of $800+ billion, even a relatively small shift of defense contractor supplies from imports to domestically produced resources could generate thousands of well-paying jobs here in the United States.
