The Takeaway
The U.S. has launched an effort to form an alliance and strategic reserve for critical minerals that are key to counter China’s market power and fortify alternative supply chains. However, implementation may prove challenging, as U.S. President Donald Trump’s hardline approach toward allies could complicate efforts to build trust and secure buy-in for a U.S.-led initiative. It also remains unclear how quickly the U.S.’s proposed measures could address China’s entrenched dominance, especially as Beijing is likely to double down, if not weaponize its position, to undermine U.S. efforts.
In Brief
- On February 4, the Trump administration hosted a critical minerals summit, drawing delegates from 55 countries, including Canada, Australia, Japan, and the European Union, in addition to several African mining producers, the Democratic Republic of Congo, Guinea, and Zambia. The meeting inaugurated the new U.S. Critical Minerals Ministerial, an alliance aimed at diversifying critical-minerals supply chains dominated by China.
- U.S. Vice President JD Vance announced plans for a “preferential trade zone” in which participating economies would trade critical minerals at a co-ordinated price floor. Reference prices would be established “at each stage of production,” with tariffs imposed on imports from outside the bloc.
- To attract partners, the U.S. promised bloc members private financing and guaranteed emergency mineral supplies.
- At the meeting, U.S. Trade Representative Jamieson Greer unveiled a bilateral plan with Mexico and a trilateral agreement with the European Union and Japan to develop trade policies that resolve supply chain fragilities, potentially including a minimum import price and a co-ordinated stockpile.
- That same week, Trump presented a US$12-billion critical minerals reserve to stockpile the U.S.’s 60 designated critical minerals, from rare earths and lithium to uranium. Known as Project Vault, the initiative would be financed through a US$10 billion loan from the U.S. Export-Import Bank and US$1.67 billion in private funds.
Implications
The U.S.-led critical minerals trading bloc is designed to counter China’s market dominance. Beijing has long been accused of flooding markets with cheap minerals, a tactic made possible by state-backed firms that can absorb losses, forcing miners in the West to shut down. In 2023, Chinese-controlled nickel glutted the market, driving global prices down 45 per cent and leaving half of the world’s nickel plants unprofitable. By imposing tariffs and price floors, the trading zone could stabilize prices, shield members from Chinese undercutting, and sustain mining investment. Since the U.S. produces and consumes only a small fraction of most critical minerals, a collectively enforced price floor and tariff regime with global partners is crucial to generating enough leverage against China’s market manipulation.
Project Vault, meanwhile, aims to keep U.S. manufacturing running during supply disruption and buy time as the U.S. and its allies shore up processing capacity. The U.S. relies entirely on imports for 16 critical minerals, many dominated by China, leaving key sectors of the U.S. economy vulnerable to export restrictions from Beijing. Officials said the reserve would secure a 60-day mineral reserve for emergencies. Its US$12-billion budget is also sufficient to purchase all the critical minerals used worldwide outside China for an entire year. At the same time, the reserve would anchor demand for non-Chinese and higher-priced minerals, helping build out alternative suppliers. Yet given China’s near-monopoly across mid-stream processing, experts caution that constructing a meaningful stockpile without sourcing from China could take years, while securing a fully non-Chinese supply chain remains a decades-long project. Before they are ready, the reserves would not insulate the U.S. and its allies, should China decide to weaponize its dominance. There is added urgency as China’s suspension of export bans on key minerals expires in November.
Canada has not yet signed on to the U.S.’s trading zone proposals. Canadian Foreign Affairs Minister Anita Anand, who attended the meeting in Washington, D.C., said Canada held off on signing sector-specific agreements that could "potentially undermine the broader effort on the Canada-United States-Mexico Agreement (CUSMA).” She added that Ottawa needs to study the proposal further, particularly the price floors. Meanwhile, Greer called the Action Plan with Mexico an important step toward deeper co-operation before all three parties review CUSMA.
Canada and the U.S. are already collaborating on several critical minerals initiatives, including the 2020 Joint Action Plan on Critical Minerals Collaboration and the G7 Critical Minerals Production Alliance. The U.S. is also Canada’s largest mineral export market, buying half of Canada’s mineral exports, including copper and potash.
Nevertheless, should Canada remain outside the zone, Canadian miners could be drawn southward or face competitive disadvantages versus “member” suppliers. The U.S. stockpile could also intensify competition for resources, especially as Canada is building its own reserves.
What’s Next
1. Skepticism lingers among U.S. partners
Trump’s aggressive foreign policy, including threats to allies’ sovereignty and withdrawal from multilateral agreements, has eroded confidence in American-led initiatives and their durability. Experts warn that countries joining a Washington-led critical minerals alliance could find themselves trading dependence on Beijing for dependence on Washington, particularly without building up their own domestic capabilities. These concerns threaten to hamper both the implementation and effectiveness of the initiative.
2. Beijing is unlikely to sit back
China's dominance in strategic minerals has given it powerful leverage. Analysts expect Beijing to double down through greater investment and R&D, as well as potential price intervention and export controls, to undermine Western efforts to ramp up market divergence.
In response to the proposed U.S.-led critical minerals trade bloc, China’s foreign ministry said it “opposes any country undermining the international economic and trade order through rules imposed by small groups.” Days after the Ministerial, Chinese Premier Li Qiang toured Jiangxi province, China’s rare earths hub, and called for rapidly advancing key technologies and expanded applications of rare earths in “new energy” and “advanced materials industries.”
• Edited by Vina Nadjibulla, Vice-President Research & Strategy, and Ted Fraser, Senior Editor, APF Canada
