As Trump eyes Canada's resources, Ottawa scrambles to form critical mineral plan B

When Prime Minister Justin Trudeau said U.S. President Donald Trump’s threat to turn Canada into the 51st state was real, fresh annexation concerns were sparked. However, not everyone is in a total panic. 

“Trudeau is not a fool. He's been at this for a long time, and he's not going to make a statement even in this context that he doesn't think is going to get out to the media and public,” said Hadrian Mertins-Kirkwood, senior researcher with the Canadian Centre for Policy Alternatives. “This was not an ‘Oops I got caught moment,’ this was a statement he was prepared to make.”

Trudeau made the remarks Friday to more than 100 business, labour and industry leaders attending an economic summit in Toronto. His comments were made behind closed doors after reporters were ushered out of the room, but the Toronto Star, which first reported the story, heard what Trudeau said because the audio was inadvertently broadcast.

The prime minister said the Trump administration knows what critical minerals Canada has and "that may be even why they keep talking about absorbing us and making us the 51st state."

Laurie Adkin, professor emerita at the University of Alberta, said Trudeau’s takeover comment may have been somewhat exaggerated to emphasize the threat. But there is no doubt Trump has the ability to harm Canada’s economy. She pointed to remarks Trump has previously made — that he doesn’t need military force to deal with Canada and can use economic leverage to extract what he wants — as evidence the White House is interested in securing whatever it wants that it can’t otherwise get through normal trade relations. 

“There's a whole list of things here we could start to think about as being of interest to Trump including the rare earth minerals that Trudeau mentioned, but also water, and he's actually mentioned that before,” she said. “At some point it will be land and food.”

“He has no scruples whatsoever, nor do any of the people who work with him about taking whatever they want,” she said. “I think they've made that very clear.”

Responding to the threat

The Canadian government should consider rapidly building a strategic reserve of critical minerals as leverage against Trump’s threat to annex Canada for its natural resources, industry observers said on Friday.

They urged Ottawa to underwrite new mines to produce the 34 minerals and metals deemed essential to Canada’s national security and its bid to be a key supplier of minerals, including copper and nickel for the global energy transition. 

“Canada should have a strategic reserve of critical minerals and metals whether under threat of annexation or not,” Frik Els, a mining expert at Adamas Intelligence, a research house, told Canada’s National Observer.

The idea is similar to the U.S.’s strategic petroleum reserve, an emergency stockpile of crude oil that is used to dampen the impact of international disruptions to oil deliveries.

Els said the federal government could provide a floor, or guaranteed, price for critical minerals that would make it viable for mining companies to develop new mines and stimulate the sector.

Trudeau’s warning came a few days after Jonathan Wilkinson, Canada’s energy and natural resources minister, said the two countries should “jointly invest” in critical minerals and energy projects, raising fears Canada could risk relinquishing control of its natural resource wealth.

The U.S. was Canada’s top trading partner for critical minerals in 2023, with two-way trade totaling $38.2 billion, according to Natural Resources Canada. Most of that trade flowed south, with the U.S. accounting for nearly 60 per cent of Canada’s total critical minerals exports. The U.S. imports are used mainly in the defence industry as well as in wind turbines, solar panels and electric vehicle batteries.

Ian London, president of the Canadian Critical Minerals and Metals Alliance, said Canada must retain control of its critical minerals and other natural resources as it lobbies to avoid crippling 25 per cent tariffs which could take effect next month. 

“Canada can and must leverage its control over its natural resources and capabilities while effectively collaborating with its partners, upstream and down, in our collective interest,” London told CNO.

“While these materials can be fully or semi-processed or more fully developed in Canada for sale to trusted and reliable customers, it does not mean the country is 'on the market',” he added. 

A recent national Leger poll showed Canadians are united in their opposition to U.S. ownership of their country’s natural resource projects, with 80 per cent of respondents fully opposed to the idea, and 70 per cent strongly opposed, while only 10 per cent support greater U.S. ownership.

“Handing control of Canada’s strategic energy resources to Trump’s corporate allies would be a grave mistake,” said John Young, a senior strategist at Climate Action Network Canada.

“Governments across the country must stand firm in the face of the U.S. president’s bullying, not make rushed decisions that compromise our sovereignty for the benefit of American billionaires,” he added.

Ottawa has not set firm targets for new mines under its critical minerals strategy, which aims to invest $1.5 billion in infrastructure over seven years and $192 million in research to support the “sustainable development of responsibly sourced critical minerals,” a spokesperson for Natural Resources Canada recently told CNO.

Only a handful of critical minerals projects have gained traction in the past year. 

A typical Canadian mine from discovery to production can average 27 years, according to a study by S&P Global, due to slow permitting and regulatory processes. That is slightly faster than the United States (29 years) but longer than Australia’s 20 years. 

In his speech in Washington this week, Wilkinson said a dependency on Russian and Chinese metals undermined U.S. national security and highlighted Canada as an obvious alternative supplier.

China processes 60 to 70 per cent of the world’s lithium and cobalt used in batteries for EVs and mines 60 per cent of the rare earth materials found in solar panels and wind turbine components, as well as processing 90 per cent of those used in semiconductors.  

Globally, the critical mineral sector is forecast by the International Energy Agency to double in market value to US$770 billion by 2040.

Escaping the U.S. orbit

Mertins-Kirkwood said it would be reassuring to hear that Trudeau has insider information that Trump’s takeover threat is not legitimate, but politics handcuff the prime minister’s options. After all, it would be “unhelpful” for Trudeau to say Canada is not taking it seriously. 

“When Trump said he wants Canada to be the 51st state, I don't think anyone thinks he actually means a state,” he said. “It just means some amount of U.S. control over our border and our resources … They don't want 40 million progressive Canadians voting in U.S. presidential elections.”

Politics could also be playing some part in Trudeau’s remarks, Mertins-Kirkwood said. Canada is headed toward an election and the Liberals want to keep control of the narrative, he noted. 

“We know that nothing has hit Poilievre as hard as this Trump situation, it's been demonstrably bad for the CPC in the polls,” he said. “So there's that angle too, the Liberals have an incentive to play up the Trump threat because it helps them.”

Politicians of all stripes, as well as economic and political experts, have in recent weeks made the case for reducing Canada’s vulnerability to the U.S. 

From knocking down inter-provincial trade barriers, to finding new major trading partners, to pursuing an aggressive green industrial strategy to leapfrog the U.S. in the energy transition, to building more fossil fuel infrastructure, many options are on the table. But decoupling from the U.S. is no trivial proposal. Any of the options will take years to pull off and won’t help much in the short term. 

Untangling decades of economic integration will inevitably mean some pain and difficult choices, Mertins-Kirkwood said. The three largest economies in the world are the U.S., China and European Union, and Canada as a middle power, would be forced to choose. 

“If we're trying to pull away from the U.S., who do we move closer toward?” he said.

For some, the European Union is the obvious choice. In early January, The Economist pitched the idea, and it has since been covered by the CBC, La Presse, and endorsed by a former spokesperson of the Canadian Embassy in Paris, as well as some Europeans like Mike Galsworthy (head of the UK’s European Movement) and former German foreign minister Sigmar Gabriel. 

“We should invite Canada to become a member of the European Union,” Gabriel told the German news site Der Pioneer, in German. “They are more European than some European member states anyway.”

If the EU option is tempting, just beneath the surface is a difficult question about the future of Canada’s economy, Mertins-Kirkwood said. The EU does not want Canadian oil and for years now, European financial institutions have pulled their money out of the oil sands due to its immense carbon pollution. As the EU member countries accelerate their energy transition to reduce the continent’s dependency on Russian fossil fuels, the potential demand for Canadian fossil fuels imports is vanishing. 

Perhaps Canada could reengage with Asian countries, particularly the major economies of China, India and Indonesia that still consume a lot of oil, Mertins-Kirkwood said. But the climate science remains unchanged, and the environmental harm and risk of stranded assets by failing to transition only grows in that scenario. 

“We need to see fossil fuel dependence and US dependence as being one and the same,” he said. 

The current political moment is upending Canada-U.S. relations which have been taken for granted since the end of World War Two, he said. The idea that Canada’s economic fortunes rise and fall with the U.S., and we can’t turn our backs on that relationship because of retribution, is simply changing the rules of engagement. 

“In this case, the retribution is already coming so what do we have to lose?”

— With files from the Canadian Press