By Vina Nadjibulla

July 30, 2026

China’s export controls, a more interventionist G7 agenda and Washington’s widening network of mineral partnerships have transformed the market in which Canada’s critical-minerals strategy must operate. Ottawa now needs to connect domestic industrial policy, international partnerships, and its North American economic relationship into a single strategy.

In 2025, China turned longstanding concerns about critical-mineral concentration into an immediate industrial-security challenge. Export controls on heavy rare earths and magnets disrupted manufacturers abroad, while broader measures announced in October threatened batteries, processing equipment and even foreign-made products incorporating Chinese materials or technology.

Those wider restrictions were suspended for a year, but the leverage remains. The International Energy Agency (IEA) estimates that their full application could impact US$6.5 trillion in annual downstream production outside China.

This is the environment in which Canada must update its 2022 Critical Minerals Strategy. The original strategy established a useful foundation for expanding responsibly produced supply and strengthening Canada’s participation in clean-energy and advanced-manufacturing value chains. But the strategic context has changed. Governments are now using export controls, investment screening, tariffs, procurement, stockpiles, and public financing as instruments of economic security.

A revised strategy must therefore connect three levels of policy that have so far evolved unevenly: a selective domestic industrial strategy; the international resilience and investment architecture Canada has helped build through the G7; and a renewed North American bargain that protects Canada’s place in U.S. mineral and industrial supply chains.

From mineral potential to strategic capability

Canada does not lack mineral potential. It lacks a sufficiently integrated system for converting that potential into financeable projects, processing capacity, contracted demand and lasting strategic influence.

The IEA’s Global Critical Minerals Outlook 2026 illustrates the challenge. Despite several years of government initiatives, concentration is still increasing across much of the value chain. China remains the leading refiner for most major critical minerals, and it also accounted for more than three-quarters of growth in refined supply between 2023 and 2025. Concentration declined modestly in rare earths as new U.S. projects and increased Malaysian production came online — evidence that targeted policy and investment support can make diversification possible.

But capital is not yet moving at the required scale. Global critical-minerals investment declined by 9 per cent in 2025. Spending on battery minerals fell by more than 20 per cent, while lithium investment declined by roughly 40 per cent. Public-finance commitments in advanced economies reached approximately US$65 billion — more than four times their 2023 level — but the IEA identifies a substantial gap between commitments and actual disbursements.

Projects outside established ecosystems also face structurally higher costs. The IEA estimates that capital costs for refining projects can be between 20 per cent and more than 150 per cent higher outside the dominant supplier. Operating costs average roughly 50 per cent more because of higher equipment, construction, feedstock and energy costs, together with infrastructure, technology, and workforce constraints.

Nor is it sufficient to bring more mines into production. Diversified mining capacity is developing more quickly than the processing and manufacturing needed to use its output. In rare earths, geographically diversified refining capacity could equal around two-thirds of projected mined supply by 2035, but planned magnet production represents only one-third.

A revised critical-minerals strategy must therefore function as an industrial strategy, not simply a mining strategy. It should identify the value chains in which Canada can provide genuine strategic value, support selected processing and advanced-material capabilities, and connect priority projects to the infrastructure, technology, capital and buyers required to make them commercially viable. Because Canada cannot assemble all those elements domestically, international partnerships must be built into the strategy from the outset.

Turning G7 leadership into Canadian outcomes

Canada has already helped build an international framework that could support such an approach.

During its 2025 G7 presidency, Canada secured agreement on a Critical Minerals Action Plan built around three pillars: standards-based markets; capital mobilization and international partnerships; and innovation in processing, recycling, substitution and the circular economy. France carried the work forward at the Évian Summit in June 2026. Rather than replacing Canada’s initiative, the French presidency made it more operational.

G7 leaders committed to reducing reliance on any single supplier for rare earths and permanent magnets outside the G7 and partner countries to below 60 per cent by 2030, with an ambition to reach 50 per cent as soon as possible. Ministers were asked to establish diversification targets for other critical minerals before the end of 2026.

The Évian declaration on securing supply chains for critical minerals also moved tools once considered unusually interventionist closer to the centre of G7 economic policy. It endorsed examination of long-term offtakes, demand aggregation, joint procurement, price-gap subsidies, quotas, revenue-stabilization mechanisms and price floors. It added cooperation on strategic stockpiles, supply-disruption alerts, traceability pilots, and recycling, and broadened the alliance launched under Canada’s presidency into a Critical Minerals Resilience and Production Alliance.

The Canadian government reported that the Alliance was catalyzing C$19.2 billion through 69 partnerships and initiatives. That is meaningful, but announced project value is not the same as capital deployed, facilities constructed or supply secured. Canada should use the Alliance to assemble project-level coalitions.

A Canadian mine or processor might combine Japanese or Korean industrial offtake, European export-credit support, Canadian and allied public financing, Indigenous ownership and technology from several G7 partners. Canada’s performance should ultimately be measured by the projects that reach final investment decisions, the processing capacity built in Canada, and the contracted demand secured from allied buyers.

Canada’s continental position: important but not automatic

Any national strategy must reflect both the depth of Canada’s critical-minerals relationship with the United States and the increasingly differentiated geography of its exports. Canada exported C$49.4 billion in critical minerals in 2025, an increase of three per cent from the previous year. Exports to the United States fell from C$30.7 billion in 2024 to C$28.8 billion in 2025, reducing the U.S. share from 63 per cent to approximately 57 per cent. That remains substantial, but it is notably below the 71.7 per cent of all Canadian goods exports that went to the United States in 2025. Canada’s critical-minerals trade is therefore already more geographically diversified than its merchandise trade overall.

The pattern varies considerably by mineral and value chain. The United States remains the dominant destination for products embedded in highly integrated North American supply chains, receiving 91 per cent of Canadian aluminum exports in 2024, along with 78 per cent of natural graphite exports and 56 per cent of synthetic graphite exports. Other critical minerals serve a broader range of markets. China and Japan are important destinations for Canadian copper concentrates; Brazil and China are major buyers of Canadian potash alongside the United States; and Canadian cobalt exports go principally to Norway, China, the Netherlands and the United States.

Canada’s critical-minerals sector is therefore neither wholly dependent on the United States nor uniformly diversified. Aluminum, graphite and selected processed materials remain deeply continental, while copper, potash, cobalt and other commodities already reach significant markets in Asia, Europe and Latin America. A revised strategy should preserve privileged access to U.S. demand where continental integration creates clear advantages, while using the G7 and partnerships with Europe and the Indo-Pacific to expand the buyers, investors and offtake partners available to Canadian projects.

The investment relationship adds another dimension. Canada’s status as a domestic source under the U.S. Defense Production Act allows projects located in Canada to receive U.S. defence-industrial funding. The amounts awarded to date have been modest relative to the cost of constructing a mine or processing facility, but their effect can be catalytic. They can support feasibility studies, resource definition, metallurgical testing, and industrial-scale demonstration at the high-risk stage before a final investment decision. U.S. participation can also validate a project’s strategic importance, attract matching Canadian support and improve its prospects of securing a long-term buyer.

The United States is building alternatives

While significant, this continental relationship is also changing. Washington is no longer assuming that existing North American supply arrangements will be sufficient. It is deliberately constructing a wider network of partnerships to reduce dependence on China and create multiple alternative sources.

In February 2026, the United States convened representatives from 54 countries and the European Commission at a major Critical Minerals Ministerial. Rather than producing one agreement signed by all attendees, the gathering launched a U.S.-led negotiating architecture consisting of bilateral frameworks, smaller coalitions, and a proposed preferential trade arrangement.

The United States and Mexico established an action plan to identify priority minerals and projects and explore border-adjusted price floors. Washington developed related arrangements with Japan and the European Union as part of an effort to lay the groundwork for a binding plurilateral agreement on critical-minerals trade.

Canada attended the broader ministerial and remains connected to the U.S.-led mineral-security ecosystem. It has not, however, been included in the emerging bilateral or minilateral trade initiative.

Canada is no longer the automatic answer whenever the United States identifies a mineral vulnerability. Canadian projects increasingly compete with projects in Mexico, Latin America, Africa, Australia and the Indo-Pacific for U.S. public financing, private investment, defence procurement, stockpile purchases, and long-term industrial offtakes.

Proximity, geology, and historical integration no longer guarantee that capital and purchasing commitments will flow to Canada. The United States still needs dependable Canadian supplies and benefits from integrated continental value chains. But as Washington develops more alternatives, Canada’s influence will increasingly depend on its ability to bring commercially viable projects into production quickly.

CUSMA and the limits of Canadian leverage

Washington’s widening network of mineral partnerships makes the Canada-United States-Mexico Agreement (CUSMA) review an immediate test of Canada’s continental position. Canada should approach the review not simply as a defensive effort to preserve tariff-free access, but as an opportunity to define its place in an emerging North American economic-security system.

Canada should seek a dedicated critical-minerals outcome under CUSMA that recognizes Canadian mines, processors, and advanced-material producers as part of the continental industrial base. That should include continued domestic-source treatment under U.S. defence programs; access to procurement, strategic-stockpile purchases, and future price-support measures; protection from tariffs or border adjustments directed at non-participating suppliers; and greater coordination around priority projects, infrastructure, standards, traceability, and long-term industrial demand.

Canada enters these discussions with meaningful assets, including integrated supply chains, dependable production, established infrastructure, and access to U.S. defence-industrial programs. Yet those advantages will carry weight only if Canada can bring viable projects into production and connect them to processing capacity, buyers and allied capital. A credible position at the CUSMA table therefore begins with clearer choices and stronger execution at home.

What a revised strategy must do

A revised strategy must begin by making choices. Canada’s critical-minerals list encompasses commodities with very different markets, security implications, and opportunities for domestic value creation. Copper, graphite, lithium, nickel, uranium, potash, rare earths, and strategic minor minerals such as gallium, germanium, and tungsten cannot all be supported through the same instruments or pursued with the same objectives.

The IEA recommends tailoring policy to each mineral and value-chain stage. Large and relatively liquid markets such as copper may primarily need infrastructure, permitting certainty and upfront financing. Small, opaque and highly concentrated markets such as rare earths may require price or volume guarantees, contracts for difference or offtake backstops.

First, Canada should classify minerals and value chains according to the strategic objective being pursued:

• minerals essential to domestic, energy and defence security;
• value chains in which Canada can credibly develop processing or advanced-material capabilities;
• minerals for which Canada’s main role will remain that of an allied upstream supplier; and
• small strategic markets where one or two projects could deliver an outsized resilience benefit.

Second, a revised strategy should focus on building complete project ecosystems rather than isolated assets. A financeable project may require public and private equity, concessional debt, infrastructure, Indigenous ownership, specialized technology, and a long-term buyer. Those pieces need to be assembled as a package rather than delivered through disconnected programs with different timelines and decision-making criteria.

Canada should create a limited national “deal book” of priority projects setting out permitting status, infrastructure needs, financing gaps, prospective buyers, international partners, and available government instruments. Inclusion should be selective, milestone-based, and tied to credible construction and production timelines.

Third, the strategy must address demand as deliberately as supply. Governments have often subsidized mineral production while assuming that sustainable commercial buyers will emerge. The IEA describes the higher cost of diversified supply as a “mineral security premium” — a form of insurance against disruption. Critical minerals often represent only a small share of a finished product’s price. The agency estimates that tripling rare-earth prices would add only about 0.1 per cent to the cost of a vehicle, even though intermediate manufacturers could face more substantial pressures.

Paying somewhat more for secure and responsibly produced supply is not necessarily economic inefficiency. It can be the price of avoiding factory shutdowns, coercive dependence, and strategic vulnerability.

Fourth, a revised strategy should define and clearly communicate Canada’s intended end state. The objective is not to exclude China from critical-mineral value chains — an unrealistic goal given that China will remain a major producer, processor, consumer, and importer across a wide range of minerals and related technologies. Canada should instead pursue diversification that reduces excessive dependence, preserves strategic choice, and strengthens resilience. That approach should be accompanied by continued communication and support for greater transparency and stability in global mineral markets.

Canada’s strongest position will come from connecting these three dimensions of policy. A disciplined domestic project pipeline will make Canada more valuable to Washington and its G7 partners. Allied capital, technology, and offtakes will make Canadian projects more competitive within North America. Secure access to U.S. demand will, in turn, improve the bankability of partnerships with Europe and the Indo-Pacific.

Canada has helped shape the international conversation on critical-mineral resilience. The next task is to demonstrate that it can build. In the new critical-minerals economy, possessing the resources is not enough. Canada must turn them into projects that allies are willing to finance, buy from, and build around.

Policy Contributing Writer Vina Nadjibulla is Vice President of Research & Strategy at the Asia Pacific Foundation of Canada.