Canada’s Energy Minister Confronts U.S. Tariffs With Critical Minerals

In the wake of U.S. steel and aluminum tariffs on Canada and the possibility of more to come, the Government of Canada is positioning itself as an international energy superpower with enough alliances, resources and leverage to stave off White House threats of more wide-ranging taxes on its products and commodities.

“On again, off again, on again, off again, on again, off again” tariffs are “weighing heavily” on the Canadian energy sector writ large, Jonathan Wilkinson, Canada’s Minister of Energy and Natural Resources, told Forbes during CERAWeek, the S&P Global conference in Houston.

Tariff threats breed uncertainty, which paralyzes global energy investment, he said. “Businesses don’t know whether they should be making investments because they don’t know if the rules are going to change three months from now,” Wilkinson said.

“I’ve heard from municipal leaders who have said they are thinking about putting in place measures to require that procurement in cities and towns can’t use American businesses,” Wilkinson said. “That would be enormously unfortunate if we get into that kind of a situation.”

“Most Canadians now when they go to the grocery store are refusing to buy anything from the United States,” Wilkinson said. “That’s just individual choices, but you can see where this is heading if we don’t find a pathway out to a more constructive conversation.”

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Wilkinson said there is a “danger” that the sentiment would spread to energy companies who look for international partners.

Batten Down the Hatches

“Canada in this new emerging world order, I think, is increasingly an energy superpower with not just energy but with the kinds of things that are relevant to energy, like critical minerals that are going to be enormously important as we move forward,” Wilkinson said.

The U.S. Geological Survey has deemed a collection of 50 metals and elements as “critical minerals,” which include four rare earth elements, all of which are essential to national security but also vulnerable to supply chain disruptions.

The minerals and elements are found in the Earth’s crust and are used in hundreds of products including smartphones, laptops, lasers, medical devices and electric vehicles.

Critical minerals and rare earth elements are aplenty, but they are concentrated in only a few regions—North America, South America and China.

Global demand for critical minerals is expected to double by 2040, Wilkinson said in the Government of Canada’s Critical Minerals Strategy Annual Report, citing the International Energy Agency, and Canada is “uniquely positioned to benefit from this growing market.”

In 2022, the most recent data, Canada’s minerals and metals sector contributed more than 25% to the country’s more than $2 trillion gross domestic product.

Canada’s Leverage

Of the 50 critical minerals, Canada owns the lion’s share of production of the top five--lithium, cobalt, copper, nickel, and manganese—collectively, thanks to its domestic industry and its interest in international mines.

The U.S. is second only to Canada in production of those critical minerals, but Canada leads the U.S. significantly on planned production overseas, according to analysis from GlobalData.

Australia, followed by Chile and Russia, has the largest lithium reserves in the world. Demand for lithium and cobalt, two elements critical to batteries for mobile devices and electric vehicles, is expected to double over the next five years, according to the USGS’s first World Minerals Outlook, released March 11.

“As U.S. leaders plan to increase domestic production of critical minerals to reduce reliance on non-market economies and mitigate risks, these data help identify where U.S. capacity may not meet demand,” said Elisa Alonso, lead author of World Minerals Outlook.

Beyond the top five critical minerals is zinc; Canada exports nearly 90% of the element to the U.S.

However, “one of the sleeping giants is potash,” Wilkinson said.

It’s a critical mineral used for food production. “That actually goes right after the [U.S.] farming community. It will raise the cost for farmers, and the cost for food,” Wilkinson said.

Wilkinson added, “I hope this is short-lived. It is a lose-lose proposition for both sides. It will create economic pain on both sides of the border. People on each side of the border will be poorer if we don’t find a pathway out of this."

“It is my hope that we are able to make this a short-lived thing and move on,” he said.

Wayward Friends

Beyond the tariff threats on Canada, the two neighbors could work together to stockpile critical minerals and advance mineral processing technologies, Wilkinson said.

In less than two years, China has stopped or curbed export of several critical minerals to the U.S., and it did the same to U.S. ally Japan in 2010.

Meanwhile, China processes 90% of critical minerals and 60% to 70% of global lithium and cobalt, according to the Government of Canada’s 2024 Critical Minerals Strategy Annual Report.

Canada and the U.S. could protect North American interests and benefit allies in Europe and Asia in a way that would curb Chinese influence globally and ensure national security for both North American neighbors.

“But it’s impossible for those conversations to advance unless the tariffs are paused and are withdrawn,” Wilkinson said. “There are lots of things we can do together, but we’re not going to be collaborating on one hand and getting whacked in the knees on the other hand.”

Keep Your Allies Close

In the absence of the U.S. by its side, Canada is looking to secure stronger alliances with Japan, South Korea, the European Union and Australia, a critical mineral powerhouse.

“The Japanese have been one of the best partners with investment in many critical mineral projects in Canada. The EU is enormously interested as are many of the member states,” Wilkinson said. “They need [critical minerals] and they don’t have them,” he said.

As South Korea is a car manufacturing hub, it is also an interested buyer, he added.

Wilkinson has been crafting Canada’s energy future for just over three years since he became Canada’s minister of energy and natural resources, though he has worked in leadership positions across the Canadian government and as an executive in the private sector.

A year after Wilkinson released Canada’s Critical Minerals Strategy Annual Report, progress is quantifiable. He secured $1.5 billion to be used over seven years for transportation and infrastructure, and $192.1 million for innovative processing technologies.

To encourage financing, he secured tax credits for new projects and developed a focused list of mining and extraction locations.

His goal is to use government tools to incentivize private capital.

Last week, he announced a mineral exploration tax credit and an infrastructure fund to help open up new mines.

Wilkinson is also trying to make the regulatory and permitting process more efficient.

“We have done a lot of work in Canada at the federal level to try to shorten those timelines and make all of this more transparent, and we are working bilaterally with every province now to try to align federal and provincial processes so we can get these projects built in a short period of time,” he said.

“We also need to create greater pricing certainty so China can’t simply tank the market and wreck the business case for many of these projects. That’s a conversation going on at the G7, which would help to accelerate this,” Wilkinson said.

“Canada needs to move faster. I think all jurisdictions do,” he said.

“When President [Trump] says, ‘We have all the critical minerals we need,’ I mean I think it’s just not the case in the context of the geology.”

“Five metal mines have been permitted in the United States in the past 29 years,” he said, adding that permitting reform is “sorely needed” in the U.S. as well.

President Trump has been a champion of U.S. critical mineral extraction and processing since his first term during which he issued an Executive Order that defined critical minerals.

Early in his second term, President Trump issued another Executive Order emphasizing the role of these elements in American prosperity, national and energy security.