Senior officials from Japan, France and Canada are developing alternatives to a U.S.-backed preferential trade bloc for critical minerals, focusing on measures to reduce dependence on Chinese supplies, according to officials from those countries.
Options under consideration include imposed import quotas for specified rare earths, direct subsidies to mining projects to make new supply commercially competitive with Chinese output, and a buyers' club concept championed by Canada that would aim to create dependable supply chains for critical minerals outside China.
In February, U.S. Vice President JD Vance announced plans to organize allied nations into a preferential trade arrangement for critical minerals. But the discussions among Japan, France and Canada indicate that, a month after that announcement, some U.S. allies are exploring different paths to the same objective - diversifying sources of rare earths and other critical minerals.
The White House did not respond to a request for comment on these alternative approaches.
Speaking on the sidelines of a mining conference in Toronto, Hiroyuki Hatada, Director of the Americas Division at Japan's Ministry of Economy, Trade and Industry, said one practical route to diversification is to subsidize projects within the Western Hemisphere so they can compete on price with Chinese producers. Hatada emphasized the practical challenge that rare earths are difficult to extract and that China currently controls over 90% of these metals, noting China imposed export controls last year in response to U.S. tariffs.
Hatada also said Japan has urged its manufacturing sector to enter commercial agreements with rare earth projects that Japan has helped fund alongside partners such as France, Australia and Canada. Regarding the economics of those projects, he said: "They might not be the cheapest, but now that the industry understands the balance of risk and price, it is not a bad idea to use those projects."
Benjamin Gallezot, France's interministerial delegate for supplies of strategic minerals and metals, told Reuters that the U.S. proposal represents one potential avenue for diversification, "but there are other ways to do it." He added that France rejects the idea of a single universal policy and believes any approach should be developed and discussed among many countries - not limited to the G7 but extending to a broader G7-plus grouping.
France has proposed specific policy tools, including a quota system that would limit the quantity of metals companies may import and an obligation on firms in certain sectors to diversify their sourcing. Gallezot also voiced support for Canada's buyers' alliance proposal and said France will advance the concept as it assumes the G7 chair later this year.
The G7 collectively, over the past two years, has introduced several measures aimed at addressing China's dominant position in rare earths. Western governments are concerned that key industries - including defense - have become too dependent on relatively inexpensive rare earths sourced from China.
Canada has recently finalized 30 agreements with 12 countries that would underpin a proposed C$12.6 billion (US$9.22 billion) package of investments in mining and mining technology, bringing total commitments since October to about C$18 billion. Australia said on March 4 that it would join Canada's G7 critical minerals production alliance.
Tim Hodgson, Canada's Energy and Mining Minister, told Reuters that "Canada believes that the best way to address the issue of concentrated supply of critical minerals is through a production alliance or a buyers' club."
These discussions underscore the range of policy instruments being weighed - from trade arrangements organized by the United States to subsidy programs, import quotas and collective buying mechanisms led by middle-power coalitions. Officials from Japan, France and Canada are pursuing parallel options while emphasizing the need for broader multilateral engagement to create supply alternatives to China.
Summary
Japan, France and Canada are exploring alternatives to a U.S.-led preferential trade bloc to secure critical minerals and reduce reliance on China. Proposed measures include import quotas, subsidies to develop mining projects in the Western Hemisphere, and a Canada-led buyers' club designed to build reliable supply chains beyond China.
Key points
- Governments are considering a mix of trade tools and industrial policy - quotas, subsidies and collective procurement - to diversify rare earth and critical minerals supply chains.
- Sectors likely affected include defense, high-tech manufacturing, electric vehicles and consumer electronics, all of which rely on rare earths for components.
- Canada has secured C$12.6 billion of proposed investments via 30 deals with 12 countries, taking total commitments to roughly C$18 billion since October, and Australia has agreed to join Canada's production alliance.
Risks and uncertainties
- China's control of over 90% of rare earth production and its recent use of export controls create a strategic risk for industries reliant on these inputs, especially defense and technology sectors.
- There is uncertainty whether a U.S.-led preferential trade bloc will gain universal support, prompting allies to pursue alternative, possibly fragmented, approaches that could complicate coordination across markets and industries.
- Subsidizing Western Hemisphere projects to match Chinese commercial competitiveness may require sustained public funding and industry buy-in; projects that are supported by allies "might not be the cheapest," which could affect industrial procurement choices and cost structures.