Corporate America's significant reliance on China presents a national security threat due to dependencies on critical materials and manufacturing, according to a recent petition filed with the Securities and Exchange Commission (SEC). The petition argues that publicly traded companies should be required to disclose the material risks associated with deep supply chain dependence on China.
China currently controls substantial shares of vital materials. The country mines approximately 70% of global rare earth elements and processes over 90% of them. The United States relies on China for numerous critical minerals essential for advanced defense systems like F-35 jets and submarines, as well as for semiconductors, electric vehicles, and medical devices. Past instances, such as China's 2010 embargo on rare earth exports to Japan over a territorial dispute, serve as examples of how Beijing can weaponize trade dependencies. More recently, China has restricted exports of gallium and germanium in response to U.S. actions, actions described as "dress rehearsals for leverage."
The pharmaceutical sector is also heavily exposed, with China supplying 60% to 70% or more of key active pharmaceutical ingredients and precursor materials for essential drugs. Much of the remaining supply flows through India, which itself relies on Chinese precursors. This dependence could lead to immediate shortages in American hospitals, pharmacies, and military facilities during a crisis, posing a national health emergency.
Proponents of the petition argue that current corporate disclosures on these risks are inadequate and vague. They contend that investors need a clear accounting of how exposed corporate America has become to potential disruptions. Without specific data on geographic concentration, single-source dependencies, and scenario analyses for major supply disruptions, policymakers lack accurate information to assess sanctions, tariffs, or defense strategies. The petition calls for companies to quantify potential impacts from China-specific shocks, moving beyond vague references to "geopolitical tensions."
Critics who suggest such disclosures burden businesses or politicize markets are misguided, according to the petition's advocates. They assert that markets function most effectively with accurate information, and concealing existential supply chain vulnerabilities distorts capital allocation and leaves shareholders vulnerable. National security and economic resilience are not considered optional externalities but material facts that require honest assessment by companies to their shareholders, not just optimistic outlooks. The strategy of "fighting without fighting" through weaponized trade dependencies, developed over decades, highlights the inseparable nature of trade policy, industrial capacity, and national security.