Critical minerals have replaced crude oil as the primary geopolitical battleground, with Canada and China leveraging supply chains to pressure the United States. Nickel, copper, lithium, and rare earth elements are now central to national security strategies.

Trade War Fallout

Tensions between Washington and Ottawa escalated after trade talks collapsed in late August. President Donald Trump announced tariffs of 50% on Canadian autos, trucks, and steel starting January 2027. Prime Minister Mark Carney promised to match these tariffs dollar for dollar and signaled a loss of interest in cooperating with the US on strategic minerals.

Ontario Premier Doug Ford threatened to halt key mineral exports to the US. Canada supplies roughly 43% of US nickel imports, the vast majority of US copper ore imports, and nearly 60% of refined zinc imports. Carney stated that Washington squandered an opportunity to cooperate, noting that Canada would pursue deals elsewhere.

China Dominates Global Market

China controls approximately 91% of global rare-earth refining and 94% of finished magnet production, according to the International Energy Agency (IEA). Reuters reported that several Chinese rare-earth producers have quietly halted shipments to the US, fearing retaliation from Beijing after China placed a Western industry compliance group on its sanctions list.

The IEA estimates that a full rollout of China's export controls could threaten roughly $6.5 trillion in downstream global production annually. Gracelin Baskaran, Director of the Critical Minerals Security Program at the Center for Strategic and International Studies, noted that China combines foreign policy to secure minerals with domestic industrial strategy to process them.

Congressional Hearing And US Response

Experts at a House Committee on Ways & Means hearing on Wednesday urged Washington to strengthen trade relationships to break China's grip on key minerals. Baskaran highlighted that critical mineral projects can take 25 years to develop, requiring policy stability beyond electoral cycles.

Under the Trump administration, the US plans to deploy hundreds of billions of dollars in capital into the mining sector. President Trump launched Project Vault, a $12 billion initiative to stockpile essential minerals, in February. The government has begun backing price floors, off-take guarantees, and stockpiling efforts with companies like MP Materials Corp (NYSE: MP) and Energy Fuels Inc (NYSE: UUUU).

USA Rare Earth Inc (NASDAQ: USAR) completed its long-pending $2.8 billion acquisition of Serra Verde Group, which owns the Pela Ema mine in Brazil. The company stated the deal creates a global rare earths leader and a partner for Western national security.

What the Numbers Show

The disparity in market control highlights the strategic vulnerability of US supply chains. While the US invests billions in new projects like Project Vault and acquisitions like USA Rare Earth's deal, China currently holds a near-monopoly on processing (91%) and finished goods (94%). Simultaneously, the US relies heavily on Canada for raw inputs, importing 43% of its nickel and nearly 60% of its refined zinc from there, making diplomatic friction with Ottawa an immediate operational risk.

The Trump administration’s $500 million investment in critical minerals targets domestic lithium, cobalt, and battery recycling projects. This capital allocation aims to strengthen processing and refining capabilities, historically bottlenecks in the U.S. battery supply chain.

The funding supports seven companies, including Lilac Solutions and Jervois, each receiving $100 million. Nth Cycle also secured backing for a battery-metal recycling initiative. The Department of Energy (DOE) focuses on these mid-stream activities to build a more secure domestic supply of critical minerals.

The Broadest Critical-Minerals Play

The Sprott Critical Materials ETF (NASDAQ: SETM) offers diversified exposure to this policy theme. The fund holds companies involved in lithium, copper, uranium, nickel, cobalt, and rare earths. With $596.6 million in net assets and a 0.65% expense ratio, SETM provides a wide basket of critical materials.

Its largest positions include Freeport-McMoRan Inc. (NYSE: FCX), Kazatomprom (OTC: NATKY), Cameco Corporation (NYSE: CCJ), and Albemarle Corp (NYSE: ALB). This composition makes SETM relevant if Washington’s strategy expands beyond battery materials into broader critical-minerals security.

The Cleaner Lithium-to-Battery Bet

For investors focused on the battery supply chain, the Global X Lithium & Battery Tech ETF (NYSE: LIT) is a targeted vehicle. The fund covers the lithium cycle, including mining, refining, and battery production. It manages approximately $1.5 billion in net assets.

This focus aligns with federal grants aimed at strengthening the middle of the supply chain rather than just raw-material production. However, LIT represents a broader global bet, meaning it does not offer a pure U.S. reshoring trade.

The Strategic-Minerals Angle

The VanEck Rare Earth and Strategic Metals ETF (NYSE: REMX) provides exposure to efforts to reduce dependence on foreign supply chains. Its biggest holdings include Albemarle, Pilbara Minerals (OTC: PILBF), MP Materials Corp (NYSE: MP), and Lynas Rare Earths (OTC: LYSDY).

REMX gives investors simultaneous exposure to lithium and rare earths. This distinction matters as Washington increasingly treats critical minerals as a national-security issue rather than solely an electric vehicle demand story.

What the Numbers Show

The allocation of $100 million each to Lilac Solutions and Jervois signals a concentrated push toward specific processing technologies. Meanwhile, the disparity in fund sizes—with LIT holding $1.5 billion versus SETM’s $596.6 million—suggests greater investor liquidity preference for the broader lithium-battery complex over the wider critical materials basket.