Why critical minerals are a bargaining chip in the Canada-U.S. trade war

Over history, gold and silver coins have been major trade darlings, and can still spur investor frenzy depending on how they're faring in markets. But as industries and economies deepen their dependence on critical minerals, these metals appear to be becoming as valuable as any commodity or currency.

Last week, Ukraine President Volodymyr Zelenskyy aimed to sign a minerals deal with the U.S. in hopes of securing longer-term support during the war against Russia. But the Oval Office meeting with President Donald Trump was cut short and any deal put on hold as the two, along with the U.S. vice-president, got wrapped up in a fiery exchange. The two presidents appear to still be willing to work towards a deal.

Ukraine isn't known for its critical minerals, but it does have reserves of copper, lithium, cobalt and nickel, and rare earth elements such as lanthanum, cerium and neodymium. These are essential components of many of today's rapidly growing energy technologies.

While mining companies may be hesitant to set up shop in a country that has been embroiled in a war, the Ukraine-U.S. talks show critical minerals can be used as a negotiating tool as countries scramble to secure supply chains amid an uncertain economic climate.

Critical minerals are helping drive modern economies because they're essential in the production of smartphones, computers, electric vehicles, renewable energy systems, batteries and satellite systems. 

Under the previous U.S. administration of Joe Biden, hundreds of millions of dollars were on offer for Canadian firms mining or processing critical minerals. 

The U.S. Department of Defence funded several projects north of the border with no strings attached in a bid to boost the North American supply and reduce dependence on China.

The Trump administration, however, seems to be favouring a different approach to secure the U.S. supply chain.

Prime Minister Justin Trudeau recently told business leaders at the Canada-U.S. Economic Summit in Toronto that Trump's threat to annex Canada "is a real thing" motivated by his desire to tap into the country's critical minerals.

However, annexation would be an impractical way for the U.S. to access Canada's critical minerals, according to Andrew Grant, associate professor in political studies at Queen's University in Kingston, Ont. 

"Logistically, it would be very difficult to implement."

Grant said there's a long history of Canada-U.S. co-operation, between companies and the different levels of government. 

The U.S. crossing the border uninvited would disrupt this collaboration and knowledge exchange, ultimately making it harder to extract the minerals from the ground for all involved. 

Grant suggested that if Canada were to leverage critical minerals as a bargaining tool in the trade war, it could secure some advantages.