Trump tariffs and foreign policy: a crossroads for critical minerals supply chains

Torys’ Canadian and New York offices will be providing regular briefs on the legal ramifications of the tariffs and other cross-border policy developments on the horizon.

In unprecedented fashion and with far-reaching impacts, the Trump administration has quickly announced a number of key foreign policy initiatives, including a fundamental re-evaluation of U.S. trade policy. These changes include the proposal of significant new tariffs and foreign policy initiatives to address a variety of economic and policy goals—many which are expected to have a profound impact on critical minerals.

Announced tariffs and foreign policy measures

Beyond country-specific tariffs, which we have discussed in earlier tariff briefs, President Trump has also taken steps toward tariffs that would apply on a global basis. The U.S. has announced 25% tariffs on steel and aluminum imports into the U.S. from all countries (including Canada), with effect from March 12. Further, the U.S. has indicated it will compare tariff rates (and other perceived trade barriers) charged by trade partners on imports of U.S. goods with those currently charged by the U.S. on trade partners’ exports to the U.S. in order to assess whether to levy reciprocal tariffs against those trade partners.

The administration’s foreign policy initiatives have also targeted partners. For example, President Trump announced an executive order on February 7, providing for the cessation of all funding to South Africa, including via USAID programs. The executive order was introduced to address U.S. concerns regarding new expropriation legislation in South Africa and South African actions in opposition to U.S. interests in the Middle East. Most recently, President Trump has advanced discussions with the participants in the Ukraine war with a view to finding a resolution to the conflict, while also pursuing and reaching an agreement to access critical minerals in Ukraine.

Retaliation by impacted nations

Impacted nations have countered with a number of proposed responses, including reciprocal tariffs (which have already been imposed by China). Canada has considered additional non-tariff measures, potentially relating to export restrictions or export taxes on critical minerals, electricity and oil and gas. China imposed new export controls on tungsten and other critical minerals, in addition to the export restrictions it had previously imposed on gallium, germanium, graphite and antimony over the last two years. In response to the executive order ceasing USAID funding, South African Resources Minister Gwede Mantashe publicly threatened to suspend all mineral exports to the U.S. and called on other African nations to do the same.

Importance of critical minerals supplied to U.S.

A frequently cited rationale for the President’s new trade policy is the desire to restore the industrial and manufacturing base in the U.S. while relying on U.S.-sourced inputs to maximum extent possible. For example, the U.S. claims it has ample domestic copper reserves to satisfy demand while noting that copper imports accounted for 45% of U.S. consumption in 2024. As a result, President Trump signed an executive order launching an investigation into how copper imports threaten U.S. national security with the goal of enhancing the domestic U.S. copper industry.

However, this approach is not reflective of the current global realities of mineral resource processing and supply, nor the distribution of identified deposits for development. This is particularly the case for critical minerals. Current critical mineral production and processing is largely located outside of the U.S. (with a heavy emphasis on China-based or controlled resources and processing capabilities) and future anticipated global demand significantly outstrips anticipated supply, particularly in jurisdictions friendly to the United States.

A February 2025 report from the Center for Strategic and International Studies found that the U.S. is 100% import-reliant for 12 of the 50 minerals identified as critical by the U.S. Geological Survey and more than 50% reliant for another 29 identified critical minerals.

Tariffs on Canada, Mexico and China are likely to increase costs significantly for U.S. industry. Canada, Mexico and China are important suppliers of metals and minerals to the U.S. and accounted for 41% of the total value of U.S. metals and minerals imports in 2023. This is particularly the case for critical minerals. China is the top global producer of 29 of the critical minerals identified by the U.S. government and dominates mineral processing, refining between 40%-90% of the world’s supply of rare earth elements, graphite, lithium, cobalt, and copper. The U.S. currently produces less than one-third of the aluminum products it requires. By value, Canada accounts for more than half of the current U.S. imports of aluminum products. Significantly increased U.S. domestic sourcing, even where possible through building of new mines and processing facilities, may take decades to achieve.

The impact on U.S. national security of not having a secure supply of certain critical minerals can already be observed. China has restricted exports to the U.S. of the three critical minerals with widespread military applications: gallium, germanium and antimony. The U.S. has allowed itself to become dependent on Chinese supply of these and other critical minerals, leaving its economy and national security significantly exposed to geopolitical tensions.

So where does this take the supply chain?

In the near term, already-constrained supply chains for many metal products and critical minerals are unlikely to be able to adjust in any meaningful way to minimize the impact of tariffs or alter the interdependence of the U.S. and Canada in this respect. As a result, the imposition of tariffs on metals and minerals from Canada, Mexico and China is likely to significantly drive up costs for U.S. manufacturers and may lead to supply shortages as suppliers seek to divert a portion of their production to other buyers.

In the long-term, these tariffs could have far-reaching implications on the efforts of both Canada and the U.S. to establish secure and stable critical mineral supply chains. This could involve Canadian and other foreign mining companies seeking alternative markets for Canadian critical minerals and alternative mineral processing arrangements. It could also spur U.S. manufacturers to source critical minerals from jurisdictions unaffected by tariffs, which may not provide the same stability and security in the supply chain.

Another alternative is that we may see a more transactional approach to the supply chain, where U.S. foreign policy or trade support is exchanged for agreements to supply critical minerals, as is the case with the recently announced agreement between U.S. and Ukraine involving a Ukrainian commitment to provide access to critical minerals to American interests. Similar proposals have been raised in connection with U.S. access to minerals in the Democratic Republic of the Congo in return for security aid to the Congolese government to address the ongoing insurgency involving Rwanda-supported rebels.

Will common interests prevail?

Ultimately, Canada and the U.S. have a common interest to strengthen critical minerals supply chains. Tariffs will disrupt the essential flow of mineral and metal resources, exacerbate vulnerabilities in critical mineral supply chains that both nations have been working to address and raise the costs of doing business for U.S. manufacturers and consumers. Chinese dominance over critical mineral deposits and processing, and the limited alternatives for secure supply that may be available through bilateral agreements, leave the U.S. significantly exposed to geopolitical tensions.

It is a geographic and geologic reality that an abundant endowment of critical minerals offering the possibility of affordable, stable and secure supply exists in Canada and is available to support industry in both countries. The U.S. and Canada have a common economic and security interest in developing together a stronger and more resilient North American supply chain for critical minerals. Cooperation needs to be pursued in the exploration and development of new projects and establishing new processing facilities on both sides of the Canada-U.S. border for a wide range of critical minerals. This will be a multi-decade undertaking involving both government and industry which offers the benefits of mutual long term economic development, security and prosperity.

 
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