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The re-election of Donald Trump as President of the United States could significantly impact the critical minerals sector through the trade and economic policies his administration might implement. Central to his campaign and post-election rhetoric, Trump’s “America First” agenda includes imposing tariffs on foreign goods and services, with a particular focus on China. He has pledged to levy tariffs of at least 60% on all imports from the country. This policy could have profound consequences, as an estimated 80% of critical mineral supply chains currently depend on China.

Recent Actions Taken By China

Amid escalating trade tensions between the United States and China, the Chinese government announced a ban on exporting several critical minerals to the U.S., including gallium, germanium, antimony, and “superhard materials” widely used in manufacturing. China justified the move by highlighting the dual military and civilian applications of these materials. This action was a direct response to the outgoing Biden Administration’s expanded restrictions on advanced technologies exported to China, aimed at curbing its ability to develop advanced chips for military equipment and artificial intelligence.

These measures are expected to be among the final actions of the Biden Administration before President-elect Donald J. Trump’s inauguration next month.

A Growing Tension Amidst Both Superpowers

The escalating tensions and actions between the United States and China are set to reverberate across key economic sectors. China’s recent export restrictions will significantly affect industries such as semiconductors, defense, and electric vehicles. Gallium is crucial for manufacturing components like satellite systems, power converters, LEDs, and high-powered chips for electric vehicles. Germanium is vital for fiber optics, infrared optics, and solar cells, while antimony plays a critical role in producing armor-piercing ammunition, night vision goggles, infrared sensors, precision optics, and electronics, including semiconductors, cables, and batteries.

A recent U.S. Geological Survey study estimates that China’s ban on gallium and germanium alone could reduce the U.S. gross domestic product by $3.4 billion.

China’s actions not only pose immediate challenges but also signal potential future restrictions on critical minerals. As part of its recent announcement, China indicated plans for stricter reviews of graphite exports to the U.S. Graphite is essential for lithium-ion battery anodes used in electric vehicles, grid storage systems, and consumer electronics. China dominates global graphite production, accounting for 77% of natural graphite, over 95% of synthetic graphite, and nearly 100% of refining, while the U.S. holds less than 1% of global graphite reserves and relies entirely on imports.

If China escalates further, it could restrict exports of graphite, lithium, and copper—minerals critical for power transmission lines, solar panels, wind turbines, electric vehicles, and other electrification technologies. Such measures would profoundly impact global supply chains and the transition to green energy.

Trump’s Agenda and Its Implications

President-elect Trump’s focus on fostering American economic and industrial independence could have far-reaching effects on the critical minerals market. In addition to the potential consequences of a trade war with China, Trump has expressed a willingness to reconsider the U.S.’s financial and military commitments to the North Atlantic Treaty Organization (NATO). Such a move could prompt European nations to accelerate efforts to secure critical minerals essential for military applications.

At the same time, resource-rich countries might become more reluctant to share their mineral reserves, prioritizing domestic needs or selling to the highest bidder. These shifts could redefine the global market for critical minerals, reshaping supply chains and altering geopolitical alliances. The incoming administration’s policies may usher in a more insular and competitive landscape for accessing and distributing critical resources.

Investing In Critical Minerals with ETFs

The global landscape is evolving as the U.S. advances toward greater energy and resource independence, prompting other nations to secure their own resource supplies.

As governments ramp up their demand for critical minerals, the value of companies and entities capable of meeting this demand is poised to rise.

For investors, this presents a timely opportunity to explore ETFs that offer pure-play exposure to a diverse array of critical minerals and mining equities vital to electrification and power generation

Global X Canada has a series of ETFs providing access to companies involved in sourcing, refining, and developing critical minerals in various ways.

The Global X Copper Producers ETF (Ticker: COPP) provides exposure to the companies active in copper ore mining listed on select North American stock exchanges by replicating the performance of the Solactive North American Listed Copper Producers Index. The reintroduction of nuclear power as a means of powering data centers means an increasing demand for uranium, a weighty metal that can be used as an abundant source of concentrated energy for nuclear reactors.

The Global X Uranium ETF (Ticker: HURA) replicates the performance of the Solactive Global Uranium Pure-Play Index, which provides exposure to companies where a significant part of the business operations is or is expected to be related to the uranium industry.

Finally, the increasing demand for lithium for use in batteries has elevated its importance. The Global X Lithium Producers Index ETF (Ticker: HILT) provides exposure to the performance of global, publicly listed companies engaged in the mining and/or production of lithium, lithium compounds, or lithium-related components. Currently, HLIT seeks to replicate the performance of the Solactive Global Lithium Producers Index.

Takeaway

As the tension between the U.S. and China increases, with trade policy being weaponized, the declining availability of commodity resources such as critical minerals is poised to increase their value over time. As such, investors who have exposure to companies that can provide these resources are in a beneficial position.

Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.