USMCA Review: Critical Minerals, Supply Chains & North American Manufacturing
The future of North American trade is increasingly intertwined with the secure supply of critical minerals, a reality that’s poised to take center stage during the review of the United States-Mexico-Canada Agreement (USMCA). Driven by demand from sectors like electric vehicles, artificial intelligence, defense, and renewable energy, securing access to these resources is no longer simply an economic issue – it’s a matter of national security and industrial competitiveness.
The current geopolitical landscape, characterized by concentrated global supply chains, has exposed vulnerabilities. In , over 60% of lithium, cobalt, and graphite – essential components in batteries and other technologies – were sourced from Australia, the Democratic Republic of Congo, and China, respectively. China dominates the processing of lithium and cobalt, controlling more than 60% of global capacity. This concentration creates significant geopolitical and commercial risks, prompting a push for greater regional self-sufficiency within North America.
Strengthening North American Supply Chains
The United States is actively pursuing strategies to bolster regional extraction, processing, and manufacturing of critical minerals. U.S. Trade Representative Jamieson Greer recently presented to Congress the benefits of establishing a regional market for these resources, aiming to incentivize mining, recycling, reuse, and manufacturing through coordinated trade policies. This initiative is a direct response to the disruptions experienced in global supply chains and a desire to reduce reliance on potentially unstable sources.
A key aspect of this strategy involves revisiting the rules of origin within the USMCA, particularly concerning the automotive sector. Advocates, such as the BlueGreen Alliance, are calling for stronger provisions that prioritize the use of North American-sourced minerals in vehicles and batteries. This would not only stimulate regional economic activity but also enhance the resilience of critical supply chains.
The U.S.-Mexico Action Plan on Critical Minerals
A significant step in this direction was the enactment of the U.S.-Mexico Action Plan on Critical Minerals in . This first-of-its-kind agreement focuses on developing coordinated trade policies and mechanisms to mitigate vulnerabilities. The plan includes identifying specific critical minerals of interest, exploring the implementation of border-adjusted price floors for imports, and discussing the potential for a binding plurilateral agreement on trade in these resources. As Ambassador Greer stated, the action plan is “an important step to strengthen bilateral cooperation and increase supply chain resilience with like-minded partners.”
Bilateral discussions between the U.S. And Mexico began in , with Ambassador Greer and Mexican Secretary of Economy Marcelo Ebrard leading the negotiations. The U.S. Intends to engage in firm negotiations to address existing bilateral and trilateral issues, including implicit tariffs, regulatory standards, and the strengthening of rules of origin. These discussions are occurring in anticipation of the broader USMCA Joint Review.
Challenges and Considerations
While the potential benefits of regionalizing critical mineral supply chains are substantial, significant challenges remain. The processing of these minerals is constrained by technical hurdles, environmental regulations, and high capital requirements. Export quotas, price volatility, and stringent environmental standards can all impact the viability of projects. The geographic concentration of reserves limits diversification efforts.
China’s longstanding dominance in rare earth production, dating back to the mid-s, serves as a cautionary tale. This dominance has created economic security concerns for numerous industries, ranging from semiconductors to clean energy technologies. Addressing these structural risks requires a multifaceted approach that includes investment in domestic mining and processing capabilities, diversification of supply sources, and the development of innovative recycling technologies.
Implications for Mexico and Nearshoring
For Mexico, the focus on critical mineral processing presents a significant opportunity linked to the ongoing trend of nearshoring – the relocation of manufacturing operations closer to end markets. The country could attract foreign direct investment in advanced manufacturing, electromobility, and the energy sectors. However, the USMCA review will also involve discussions on crucial issues such as labor law compliance, energy policy, and the permissible use of third-party content within regional supply chains.
A Geoeconomic Perspective
The United States’ interest in securing critical mineral supplies extends beyond North America. The National Security Strategy identified Africa as a priority region for investment in energy and critical minerals, aiming to diversify supply sources and counter strategic competition with China. This broader strategy underscores the understanding that securing access to these resources is not merely an industrial issue, but a fundamental element of trade and geoeconomic policy.
The decisions made during the USMCA review have the potential to reshape foreign trade flows and redefine the configuration of supply chains across North America. The outcome will likely determine the extent to which the region can reduce its vulnerabilities and establish a more secure and resilient foundation for future economic growth and technological innovation.