Japan, France, Canada work on alternatives to US-led trade bloc for rare earth supplies

By Divya Rajagopal

TORONTO, March 6 (Reuters) - Group of Seven members Japan , France and Canada are working on alternatives to a U.S.-led trade bloc to secure critical minerals and reduce reliance on China , according to three senior officials from these countries.

Some options include import quotas on certain rare earths, subsidies for mining companies to diversify the supply chain on critical minerals, and a buyers' club, a Canada-led G7 initiative that aims to develop a reliable supply chain of critical minerals outside of China and break that country's monopoly on these metals.

In February, U.S. Vice President JD Vance unveiled plans to marshal allies into a preferential trade bloc for critical minerals. But a month after that announcement, some countries are making different plans, an example of Canadian Prime Minister Mark Carney's appeal for middle powers to band together as U.S. President Donald Trump has alienated allies.

The White House did not respond to a request for comment.

One way to diversify rare earth supply chains would be to subsidize projects in the Western Hemisphere to make them commercially competitive with China, said Hiroyuki Hatada, Director of the Americas Division of Japan's Ministry of Economy, Trade and Industry, on the sidelines of a mining conference in Toronto.

Rare earths are difficult-to-extract metals used in cell phones, EVs, and high-tech weapons. China currently controls over 90% of these metals and imposed export controls last year in retaliation for U.S. tariffs.

Japan has asked its manufacturing industries to strike commercial deals with rare earths projects that it has funded with allies such as France, Australia, and Canada.

"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," Hatada explained.

Benjamin Gallezot, France's interministerial delegate for supplies of strategic minerals and metals, told Reuters the U.S. proposal is one way to diversify, "but there are other ways to do it."

"There will not be a general policy, that is our view. Second, it has to be built and discussed between a large number of countries, not only the G7, but G7 plus."

France suggested a quota system where companies can import only certain amounts of metals, and an obligation for companies in certain sectors to diversify their supply chains. Gallezot also said France supports Canada's idea of a buyers' alliance and will take the concept forward as it takes over the chair of G7 this year.

The G7 countries, over the last two years, have proposed several measures to tackle China's dominance in rare earths. Western countries worry that key industries including defense have grown too reliant on cheap rare earths from China.

Canada has recently signed 30 new deals with 12 countries for a proposed C$12.6 billion ($9.22 billion) of investments in mining and mining technology, taking the total investments to around C$18 billion since October. Australia said on March 4 would join Canada's G7 critical minerals production alliance.

"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," Energy and Mining Minister Tim Hodgson told Reuters on Tuesday.