China’s recent export controls, especially of rare earth elements (REEs), have left Western companies reeling, with some firms allegedly considering shifting elements of production back to China just for access to the minerals. Indeed, the need for these minerals is so urgent that they took center stage in the recent U.S.-China negotiations in London, held in an effort to ease the trade war between the two countries. While the preliminary agreement to come out of these talks offers some respite, the United States needs to find reliable sources of REEs, and Canada could emerge as an alternative supplier to complement U.S. efforts to get domestic REE production back on its feet. However, this will require both countries to admit they still need each other, amidst the tension generated by President Donald Trump’ tariffs and talk of annexing Canada.
REEs, and magnets produced from them, are essential to electric and conventional automobile manufacturing, semiconductors, turbines, medical devices and the defense industry. These minerals have captured the public’s, and President Trump’s, attention in recent months, as a steady drumbeat of reports announcing the discovery of new and heretofore underdeveloped deposits of REEs valued in the tens of billions are released.
Both Ukraine and Greenland, for instance, are allegedly home to massive quantities of the elements, but neither country has any current production. The likely driver of the U.S. president’s musings over annexing Canada is access to the country’s vast natural resources, including critical minerals. Of course, the bottleneck in the REE market is not due to the size of a country’s reserves, but the economics of separation, processing, and refining. Despite their importance to the global economy, the profit margins in the REE industry are punishingly slim, driven down further by China, which has been able to channel state resources and financing to its domestic sector to create a virtual monopoly on these minerals. Not only has China boxed out many competitors, but on April 4, it stopped exporting REEs, causing alarm across industries.
The United States has pursued a variety of initiatives aimed at revitalizing its formerly world-renowned REE industry. Most notable among these efforts is MP Materials’ Mountain Pass mine in California. The company recently announced it will be developing a refining facility in Fort Worth, Texas, to help build a vertically integrated supply chain for rare earth magnets within the United States. But the estimated 1,000 tons of magnets the facility will produce annually once it is up and running will amount to less than a third of 1 percent of China’s 2024 output, well below the levels needed to weaken the country’s grasp on the sector.
The White House has also pursued minerals agreements with countries including Ukraine to secure long-term supplies. But it will be years, if not decades, before these agreements bear fruit, while more REEs are needed now across U.S. domestic industry. Overlooked in much of this discourse are the investments that the United States’ closest neighbor and now-estranged ally—Canada—has been making north of the border.
The Saskatchewan Research Council (SRC), located in Saskatoon, Canada, was the first commercial-scale REE processing facility to set up shop in North America. In December of 2024, the SRC successfully produced 40 tons of high-purity neodymium-praseodymium metals. More recently, the SRC signed a memorandum of understanding with U.S. firm REalloys, which supplies high-performance rare earth magnets to defense contractors. The agreement aims to achieve annual production of 500 tons of magnets by 2026, and 1,000 tons by 2028. Like MP Materials, these quantities pale in comparison to China’s behemoth REE industry, but the fact that production is ongoing rather than theoretical places it as one of the most promising REE projects in operation. Furthermore, SRC has developed its own separation and refining process, clearing a major technical hurdle and introducing the potential for this knowledge to be diffused, licensed, and scaled. According to representatives from the company, SRC has been able to remain cost competitive by incorporating greater automation and artificial intelligence that allows it to achieve higher efficiency per worker compared to competitors in China.
SRC is not the only operational REE project in Canada. Quebec currently boasts two commercial-scale facilities, in the form of Rio Tinto’s Sorel-Tracy scandium demonstration plant, and Geomega’s Saint-Bruno-de-Montarville rare earth recycling demonstration plant. In 2022, Sorel-Tracy reported its first production of high-purity scandium oxide, used in lightweight aluminum alloys in the aerospace sector. Saint-Bruno-de-Montarville takes aim at a different part of the supply chain, recovering precious REEs from magnets found in technologies like wind turbines and electric vehicles to create a circular supply chain. Both benefit from the province’s long history of metal refining, and abundant clean energy from hydropower. These two facilities remain smaller in scale, but once again present building blocks upon which a more robust U.S.-Canada REE strategy could take shape. Finally, 12 more REE projects in Canada are estimated to be in the exploration or initial assessment phases.
Canada is accordingly a prime target for a U.S. minerals strategy that aims to boost domestic mining and refining while partnering with allies to weaken China’s dominance. For more than 30 years, Canada has been a part of the U.S. defense industrial base, and during President Trump’s first term, the two countries signed a Joint Action Plan of Critical Minerals Collaboration. To date, the United States has invested more than $70 million in Canadian critical minerals projects under the Defense Production Act (DPA). This includes a recent $15 million commitment by the Trump administration to support Northcliff Resources’ tungsten project in New Brunswick.
But tensions between the two countries risk unraveling this collaboration at a time when it is most needed. China has done the United States a favor by wielding REEs as a weapon of trade war, but the United States risks squandering that opportunity by alienating partners like Canada who could serve as alternative suppliers. This applies not just in the case of rare earths, but steel, aluminum, uranium, and potash, where Canada is the largest supplier for U.S. industry and agriculture.
Despite these headwinds, there are a number of areas where the United States and Canada can cooperate to bolster North American minerals security as a whole.
- In addition to supporting existing REE projects like Mountain Pass and SRC, Washington and Ottawa should consider establishing a joint REE extraction and processing facility to supply both nations. While this can and should bring in private sector players including the aforementioned firms, a high-level commitment from the two countries that REEs are a matter of national security would be a powerful signal. Such an agreement should also allow for technology transfer between the United States and Canada to identify new methods for REE extraction and processing.
- China’s export restrictions have had such a pronounced effect because much of U.S. industry lacks sufficient stores of REEs to maintain production in the face of supply chain disruptions. Building out national stockpiles is one way to alleviate this pressure, and the U.S. National Defense Stockpile can serve as one such mechanism, though it currently remains in dire need of replenishment. Australia has also announced plans to develop its own minerals stockpile in response to escalating geoeconomic tensions. As outlined in a previous CSIS Brief, Canada should consider standing up its own stockpile, which could not only help to build strategic autonomy, but act as a buyer of last resort for Canadian minerals projects in the face of price fluctuations. Additionally, the United States and Canada alike might consider creating incentives like tax credits for companies to maintain their own minerals stockpiles to create additional resiliency across industry.
- While continued investments under DPA Title III have been a promising sign of U.S.-Canada minerals cooperation, more is needed in the race to secure critical minerals. Canada, for its part, should consider developing its own equivalent to the DPA to target investments in defense-critical resource projects. Such a fund would be another means for Canada to demonstrate its commitment to North American, and north Atlantic defense following Prime Minister Carney’s commitment to boost defense spending to 2 percent of GDP by the end of 2025. Ultimately however, developing patient capital needed to support greenfield mining and processing will be necessary for North America to tap its full minerals potential. Unfortunately, current trade tensions disincentivize these kinds of investments, making a swift resolution to the Trump administration’s tariffs and the Canadian counter-tariffs essential.
Neither government should have any illusions about the difficulty of weakening, let alone supplanting, China’s REE monopoly. Restoring industrial-scale REE production in North America also poses thorny questions when it comes to environmental safeguards, community relations, and enabling infrastructure, particularly energy supply. It will also require significant political will from both countries. The Trump administration claims Canada has nothing to offer that the United States cannot get at home, while the Carney government proclaims the old model of U.S.-Canada cooperation is over (what comes next remains uncertain). Both leaders would do well to recognize that the United States and Canada are both far stronger together than apart. Partnering on minerals security could be a necessary first step to remind both Washington and Ottawa of this fact, and aligning on a safer, stronger, and more prosperous North America.
Christopher Hernandez-Roy is a senior fellow and deputy director of the Americas Program at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Henry Ziemer is an associate fellow with the Americas Program CSIS.
