Supply chains become a battlefield in escalating geopolitical tensions

As nations weaponise supply chains through export restrictions and strategic controls, businesses face new challenges in managing geopolitical risks and ensuring resilient sourcing amidst rising international tensions.

The concept of “weaponising” supply chains has evolved significantly in recent years, transitioning from a metaphor for competitive advantage to a tangible reality reflecting geopolitical tensions. At the recent Council of Supply Chain Management Prof...

essionals (CSCMP) EDGE Conference, Cam Holt, president of strategic markets at supply chain technology firm Exiger and a retired U.S. Air Force major general, characterised supply chains as a “new domain of warfare.” According to Holt, countries increasingly wield their control over supply chains as instruments of national power, underscoring a shift from economic competition to strategic geopolitical leverage.

This perspective is echoed broadly across the industry. Per Hong, a partner and global lead at management consultancy Kearney, emphasised the unprecedented direct impact of geopolitics and government policy on supply chain operations worldwide. A prominent example is China’s recent imposition of export restrictions on 17 rare earth materials, a move that reverberates globally given China’s dominant role in the sector. The International Energy Agency estimates that China controls roughly 70% of rare earth mining and between 90% to 95% of the refining capacity worldwide, highlighting the strategic significance of these materials, which are essential in electronics, weapons technologies, and green energy production.

China’s expanded controls, which now cover a broader range of minerals including lithium, cobalt, and tungsten, are seen as a deliberate exertion of political leverage amid ongoing trade tensions, primarily with the U.S. Reuters reports that this attempt to “fire the big gun” of export restrictions has sparked considerable concern among Western governments, who fear a disruption that could compromise critical tech sectors and national security. Yet, this strategy has its risks for China as well. Western response may include accelerated investment in alternative supply chains and refining capabilities, despite the high cost and complexity, potentially resulting in a bifurcated global system: a politically influenced and cost-efficient Chinese supply network on one hand, and a more secure but expensive Western equivalent on the other.

The international reaction has been coordinated and firm. At the International Monetary Fund meetings in Washington, G7 finance ministers declared a united front in their approach to China’s export controls. European Economic Commissioner Valdis Dombrovskis underscored the importance of collaboration to both find near-term solutions to supply disruptions and pursue long-term diversification strategies. These efforts aim to strengthen supply chain resilience and reduce dependency on China by broadening the supplier base.

U.S. officials have been particularly vocal in condemning China’s actions. Trade Representative Jamieson Greer and Treasury Secretary Scott Bessent labelled China’s expanded export controls a “power grab” and a threat to global supply chains. While emphasising a preference for diplomatic de-escalation, they signalled readiness to respond decisively if necessary. Bessent expressed frustration over slowdowns in Chinese shipments and increasing concerns about China’s reliability as a supplier, especially given its evolving geopolitical alliance with Russia. Amid talks of a potential meeting between U.S. President Trump and Chinese President Xi Jinping, the U.S. is also poised to release evidence linking Chinese-made components to Russian military drones, further entangling supply chain issues with broader geopolitical conflicts. Discussions continue among G7 nations regarding synchronized measures such as export controls, tariffs, and restrictions relating to China’s trade with Russia.

For supply chain managers navigating this new reality, the implications are profound. There is a clear imperative to extend visibility and risk assessment deep into the sourcing of raw materials, transcending traditional concerns such as supplier insolvency or natural disasters. The challenge now includes monitoring potential exposure to export restrictions and geopolitical chokepoints, including the risk of hostile actors seizing control of critical supply nodes.

Despite the increasing friction on the global stage, experts caution against transactional or overly adversarial approaches to supplier relationships. Kate Vitasek, a distinguished fellow at the University of Tennessee’s Global Supply Chain Institute, emphasised that while diversification is a growing trend aimed at building resilience, there are circumstances where single sourcing remains strategically advantageous. Rather than avoiding dependency altogether, she advocates for fostering transparency, trust, and collaborative risk mitigation with key suppliers.

“Don’t be afraid of dependency,” Vitasek advised, “instead be smart about it. Ask yourself, ‘Who am I choosing to have a dependency with?’ We must demand transparency and put in processes to mitigate risks.”

In summary, the evolving geopolitical landscape is transforming supply chains into arenas of strategic contestation, where national power plays intersect with global commerce. Organisations must adapt by enhancing supply chain transparency, diversifying sources, and cultivating trusted partnerships while remaining vigilant to the broader political dynamics that influence global trade flows. This nuanced approach will be key to navigating the weaponisation of supply chains and safeguarding business continuity in an increasingly complex international environment.

Source: Noah Wire Services