President Trump’s 100% tariff threat against Chinese imports is being framed as just another fusillade in an escalating trade war between Washington and Beijing. It isn’t. It is the latest move in a sharper contest over who controls the critical-minerals value chain that runs upstream from today’s sources of hard power—from the neodymium-iron-boron (NdFeB) magnets inside precision-guided munitions to the heavy rare earth oxides that make active electronically scanned array radars sing. Beijing has moved to tighten export controls on rare earths, magnets, and key processing technologies, using the weapon of licensing to cover goods that contain more than trace amounts of Chinese content or may have been processed by Chinese facilities. Ottawa can’t afford to see this as distant noise. Canada sits squarely in the blast radius—and just as squarely on the solution set.
The strategic logic is simple. China has worked for years to knit together dominance from mine head to magnet shop, and now it is moving to police outflows with a ruleset that is a functional analogue to the Foreign Direct Product Rule that Washington has long enforced in the U.S. defense market. That means the chokepoint is no longer just ore or oxide; it is the knowledge, tooling, and compliance risk associated with any product that has been touched by Chinese inputs or has been through Chinese processes. Licenses can be granted—and also slowed, narrowed, or denied—inserting friction precisely where Western defense planners need predictability. When Washington answers with tariff threats, it is not haggling over container-ship prices; it is signaling that supply chains for defense-critical materials are now national security goods and that economic instruments will be used accordingly.
For the United States and NATO, the clock is already ticking. New U.S. rules will phase in a prohibition on Chinese-origin rare-earth magnets in defense systems by January 1, 2027, extending the restriction across the entire magnet supply chain—from mined material through sintered magnet—thereby forcing prime contractors to certify non-Chinese provenance or risk program disruption. The intention is clear: de-risk weapons programs before licensing games and legal exposure cause line-down delays. Canada’s defense industry, integrated at every level with U.S. primes, is therefore implicated whether we like it or not. If a Canadian component contains Chinese-origin magnet material, it becomes a liability under Pentagon rules and a headache for any aerospace or shipbuilding line with U.S. end-use.
This is where Canada’s dual reality comes into focus. On the one hand, we are exposed. Canadian firms build subsystems for platforms that will be caught by U.S. sourcing mandates, and many of those subsystems still rely—directly or once removed—on Chinese-dominated processing. Ottawa has already had to referee deals to keep Canadian rare-earth feedstocks from flowing into Chinese hands, a reminder that “just sell the concentrate” is not a strategy in a world of weaponized interdependence. On the other hand, we have assets and leverage. Saskatchewan’s Rare Earth Processing Facility, advancing toward commercial output of NdPr metals with commissioning through 2026–27, is positioning Canada to join North American producers of rare-earth metals at meaningful volumes. Pair that with Canadian-headquartered Neo Performance Materials’ newly opened magnet plant in Estonia, built to supply European and transatlantic customers, and you can glimpse a Western chain that runs from friendly rock to allied rotor.
The near-term task is to turn glimpses into guarantees. That starts with aligning Ottawa’s Critical Minerals Strategy with U.S. and G7 efforts that are explicitly about defense resilience, not only energy transition. Canada’s updated critical-minerals list and recent G7 coordination give us the policy scaffolding; what’s needed now is a tight focus on defense-critical materials and a willingness to privilege speed, financing, and permitting for projects that close specific military gaps—heavy rare earth separation, NdFeB metal-making, magnet finishing, and recycling. If Washington is moving magnets out of China’s orbit by law, Ottawa should be moving capital and timelines to meet that demand by design.
Execution matters more than slogans. The Saskatchewan facility has promised hundreds of tonnes per year of NdPr metals; the value to allies is not in the press release but in stable lots that meet defense specs, delivered on schedule, with tracer-clear provenance. Likewise, Canadian mining and processing bets must be paired with contractable offtake from U.S. and European defense supply chains. That means our trade and defense officials should be brokering three-way arrangements—Canadian producers, allied primes, and export-credit backstops—to take projects from “bankable” to “building now.” The alternative is waiting for Chinese licensing delays to cascade through Western programs while our own facilities sit at half-utilization.
Regulatory clarity is the other pillar. If Beijing’s new controls extend practical reach to products containing Chinese materials or made with Chinese know-how, Canadian firms need clear, authoritative guidance on how to audit bills of material, document non-Chinese inputs, and redesign around Allied sources. Ottawa can convene an industry task force—National Defence, Innovation, Science and Economic Development, Natural Resources, and Export Controls—charged with issuing a “defense-critical magnets and oxides playbook” within weeks, not months. Every mid-tier supplier should know which alloys, powders, and magnet blanks are presumptively compliant, which are not, and where to source approved substitutes. The mission is to keep Canadian vendors in U.S. and NATO programs as compliance thresholds harden.
There is also a continental angle we ignore at our peril. NORAD modernization, the Canadian Patrol Submarine Project (CPSP), and air and missile defense all ride on components that live downstream of rare-earth separation and magnet finishing. If Canada wants to be more than a passenger in continental defense, we should tie critical-minerals financing to our own capability priorities—P-8A sustainment, radar networks, undersea systems, and the industrial base that supports them—and we should do it in lockstep with U.S. authorities implementing the 2027 ban. Building magnets in Narva is good. Refining metals and building magnets in North America is better. Refining and building in Canada, tied to Canadian and American defense demand with enforceable offtake, is best.
The bigger picture is sobering but solvable. China’s decision to license and, when it chooses, ration the flows of rare earths and the know-how to process them is a rational play for leverage. Trump’s tariff threat is a blunt counter, but behind the noise sits an overdue realignment: the West is finally treating critical minerals as strategic inputs, not commodity trivia. Canada can either be buffeted by that realignment, watching contracts drift away as compliance tightens, or it can help lead it, converting geology, processing expertise, and allied trust into durable advantage. The value chain is the battlefield. If we build ours with the urgency of a defense program—not a subsidy pageant—Canada won’t just weather this fight. We’ll help win it.
Andrew Latham, Ph.D., a tenured professor at Macalester College in Saint Paul, Minnesota. He is also a Senior Washington Fellow with the Institute for Peace and Diplomacy in Ottawa and a non-resident fellow with Defense Priorities, a think tank in Washington, D.C.