As the United States races to reduce its reliance on China for minerals vital for national, economic, and energy security, tariffs with Canada may drastically undermine these efforts. Canada is the biggest source of the United States mineral imports, providing key sources of uranium, aluminum, nickel, steel copper, and niobium. To put it into perspective, in 2023, Canada accounted for $47 billion of United States mineral imports. China followed with $28.3 billion. The consequences of tariffs would be particularly profound for the defense industry, nuclear energy, and heavy manufacturing. A 25 percent tariff on Canadian mineral imports could cost U.S. off-takers an additional $11.75 billion—a figure that would increase as base metal and uranium prices recover.
Canada would likely adopt retaliatory tariffs, as they did when Trump imposed Section 232 tariffs on steel and aluminum imports from Canada in 2018 and 2020 (backing down both times). In 2023, the United States sent $30.7 billion in minerals to Canada. The retaliatory tariffs could lead Canadian firms to pay an estimated additional $7.6 billion in tariffs, encouraging them to turn to other import sources for off-take, further undermining U.S. firms.
An increase in the cost of commodities—or shortages of it—can have significant impacts on the defense, nuclear energy, and manufacturing industries at a time when the United States needs to build its capabilities.
Uranium is the feedstock for nuclear energy. The United States leads the world in nuclear energy production and has the largest number of operational nuclear reactors. However, this leadership may not last. In recent years, U.S. nuclear electricity generation has either declined or stagnated due to plant retirements and insufficient construction of new reactors. As a result, China is poised to overtake the United States in nuclear generation capacity by 2030, with 150 new reactors expected to come online between 2020 and 2035. The greatest challenge to maintaining U.S. nuclear leadership lies in securing uranium supply.
On the defense front, China is making significant investments in munitions and acquiring high-end weapons systems and equipment at a rate of five to six times faster than the United States. China is also the world’s largest shipbuilder and has a shipbuilding capacity that is roughly 230 times larger than the United States. Undermining the cost competitiveness of mineral inputs like nickel and aluminum is likely going to be a deterrent to accelerating domestic manufacturing efforts for vital defense technologies.
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