China’s recent export controls on rare earth elements (REEs) are causing significant disruptions for Western companies, prompting some firms to consider relocating parts of their production back to China to secure access to these critical minerals.
The urgency for REEs has taken center stage in the ongoing U.S.-China negotiations aimed at alleviating tensions stemming from the trade war, with a preliminary agreement providing some temporary relief.
However, for the United States to ensure a reliable supply of REEs, it must look north to Canada as a potential partner and alternative source, complementing domestic efforts to reinvigorate U.S. REE production.
This collaboration is essential, especially given the backdrop of President Donald Trump’s tariffs and discussions that have strained the relationship between the two countries.
REEs, along with the magnets produced from them, play a crucial role in manufacturing electric and conventional vehicles, semiconductors, turbines, medical devices, and defense technology.
In recent months, these minerals have garnered significant attention, highlighted by revelations of new, undeveloped REE deposits estimated to be worth billions, further igniting interest from policymakers.
Countries like Ukraine and Greenland have been identified as having substantial untapped REE resources, yet neither currently engages in production.
The suggestion of annexing Canada by President Trump might stem from a desire for access to its extensive natural resources, particularly crucial minerals like REEs.
Nevertheless, the bottleneck in the REE supply chain is not merely the volume of reserves but rather the economic factors involved in separation, processing, and refining these materials.
Despite the strategic importance of REEs, the profit margins within the industry remain exceedingly low, exacerbated by China’s dominance, which has established a virtual monopoly in the sector by leveraging state resources and financing.
The situation intensified on April 4 when China halted the export of REEs, causing widespread alarm across various industries reliant on these components.
In response, the United States has developed several initiatives to restore its once-thriving REE sector, notably through MP Materials’ Mountain Pass mine in California.
The company has plans to establish a refining facility in Fort Worth, Texas, aiming to create a vertically integrated supply chain for rare earth magnets domestically.
However, the anticipated annual production of 1,000 tons from this facility would represent less than 0.3 percent of China’s expected output in 2024, highlighting the extent of the challenge in reducing China’s market influence.
The White House has pursued minerals agreements with countries such as Ukraine, seeking to secure long-term access to REEs, but these collaborations will take years to yield results, and the need for REEs is immediate within U.S. industries.
At the same time, notable investments by Canada in the REE sector are going unacknowledged.
The Saskatchewan Research Council (SRC) became the first commercial-scale REE processing facility to open in North America and has made significant strides.
In December 2024, SRC successfully produced 40 tons of high-purity neodymium-praseodymium metals.
Furthermore, the SRC has entered into a memorandum of understanding with U.S. company REalloys to achieve an annual magnet production target of 500 tons by 2026 and 1,000 tons by 2028.
While these production targets still fall short compared to China’s overall output, the active production of REEs positions SRC as one of the foremost prospects in North America.
The SRC has innovatively developed its separation and refining process, erasing a vital technical barrier and creating possibilities for knowledge sharing and scale-up in the industry.
By integrating automation and artificial intelligence, SRC has maintained competitive pricing, achieving higher efficiency per worker than many Chinese operations.
Beyond SRC, Quebec houses two other operational REE projects: Rio Tinto’s Sorel-Tracy scandium demonstration plant and Geomega’s Saint-Bruno-de-Montarville rare earth recycling demonstration plant.
In 2022, the Sorel-Tracy facility announced its initial production of high-purity scandium oxide used in lightweight aluminum alloys for the aerospace industry.
Meanwhile, the Saint-Bruno-de-Montarville project focuses on a circular supply chain approach, recycling valuable REEs from magnets in technologies like wind turbines and electric vehicles.
These developments are bolstered by Quebec’s extensive history in metal refining and its ample clean energy resources from hydropower.
An estimated 12 additional REE projects in Canada are in various stages of exploration or initial assessment, indicating a growing sector.
Recognizing Canada as a strategic partner is essential for the U.S. in any mineral strategy designed to bolster domestic mining and refining operations.
Canada has long been a vital component of the U.S. defense industrial base, and during President Trump’s tenure, both nations initiated a Joint Action Plan of Critical Minerals Collaboration to strengthen ties.
To date, the United States has invested over $70 million in Canadian critical minerals initiatives under the Defense Production Act (DPA), including a recent $15 million allocation for Northcliff Resources’ tungsten project.
Despite existing collaboration, increasing tensions between the two nations could jeopardize essential partnerships, especially as China leverages REEs in its trade arsenal.
To seize opportunities created by China’s restrictive policies, it would be unwise for the U.S. to alienate allies like Canada who could provide alternative supplies of minerals not just for REEs, but also for steel, aluminum, uranium, and potash, all critical to U.S. industries and agriculture.
There are potential pathways for enhanced U.S.-Canada collaboration that can improve North America’s broader minerals security.
First, both nations can continue to support their ongoing REE projects, like Mountain Pass and SRC, while also considering the establishment of a joint extraction and processing facility dedicated to supporting both economies.
Such a partnership could signal a significant commitment from both governments that REEs constitute a matter of national security.
Furthermore, this agreement could facilitate technology exchanges to discover superior methods for extracting and processing REEs.
China’s export restrictions have revealed a troubling fact: much of U.S. industry lacks adequate reserves of REEs to withstand production supply disruptions.
One solution could involve building national stockpiles, with the U.S. National Defense Stockpile serving as a possible model, though it currently requires replenishment.
Australia has likewise announced intentions to create its own mineral stockpile in light of growing geoeconomic challenges.
Canada too should contemplate establishing a stockpile to bolster strategic autonomy and act as a buyer of last resort for Canadian mineral enterprises facing market volatility.
Lastly, both nations might consider offering incentives, such as tax credits, to companies for maintaining mineral stockpiles, thereby enhancing resilience across various sectors of industry.
Under the DPA Title III, recent investments showcase a promising foundation for U.S.-Canada minerals collaboration, but more robust efforts are crucial to secure critical minerals in an increasingly competitive environment.
From Canada’s standpoint, it should explore developing its own program similar to the DPA to direct investments toward defense-critical resource projects.
Such initiatives would underscore Canada’s commitment to North American defense, reflecting Prime Minister Carney’s goal of increasing defense spending to 2 percent of GDP by the end of 2025.
To fully unlock North America’s mineral potential, significant investment in greenfield mining and processing is essential.
However, ongoing trade tensions create formidable barriers to these investments, making a resolution to the Trump administration’s tariffs and Canada’s corresponding counter-tariffs vital.
Both governments must acknowledge the complexities involved in challenging—or replacing—China’s REE supremacy.
Restoring large-scale REE production in North America also entails addressing intricate issues surrounding environmental protections, community engagement, and essential infrastructure needs, particularly regarding energy supply.
Achieving this goal will necessitate considerable political commitment from both sides.
President Trump’s assertion that Canada has little to offer the U.S. may overlook the potential benefits of a collaborative approach.
Meanwhile, the Carney government’s statement suggesting that traditional U.S.-Canada cooperation might be outdated raises questions about the future of the two nations’ partnerships.
It is evident that both Washington and Ottawa should recognize that together they hold a far stronger position than apart.
Fostering cooperation on minerals security could serve as a vital first step in rekindling this vital understanding, setting the stage for a more secure, prosperous, and unified North America.
image source from：https://www.csis.org/analysis/canada-may-be-united-states-best-hope-minerals-security
