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By Kyle Anthony, Benzinga
The new administration of President Donald Trump could reshape the outlook for the critical materials sector through the trade and economic policies enacted by his administration. As noted in his presidential campaign and reiterated many times after his election win, President Trump’s ‘American First’ agenda emphasizes instituting tariffs on foreign-sourced goods and services, of which China is his most prominent target, with a promised tariff of at least 60% on all items from the country. Such an action has far-reaching implications, as it is estimated that approximately 80% of critical mineral supply chains run through the People’s Republic of China.
China’s Recent Retaliatory Actions
Against the backdrop of the growing trade war between the two nations, China announced a ban on exports of several minerals to the U.S., namely gallium, germanium, antimony and so-called “superhard materials” used heavily in manufacturing. It argued that these minerals have both military and civilian applications. These recent actions taken by the Chinese government were in response to the outgoing Biden Administration’s recent broader restrictions on advanced technology that can be sent to China to prevent the country from developing its advanced chips for military equipment and artificial intelligence.
Critical Minerals And A Trade War
Both nations' escalating rhetoric and actions could have repercussions across the economic landscape. China’s recent actions could impact the semiconductor, defense and electric vehicle sectors. Companies rely on gallium to produce a variety of military and electronics components, including satellite systems, power converters, LEDs and the high-powered chips used in electric vehicles. Germanium is used in fiber optics, infrared optics and solar cells. Antimony is used in armor-piercing ammunition, night vision goggles, infrared sensors, bullets and precision optics and the electronics industry, including semiconductors, cables and batteries.
A recent U.S. Geological Survey study highlighted that China's outright ban on gallium and germanium could reduce U.S. gross domestic product by $3.4 billion.
Though China’s recent actions are noteworthy, they also set a precedent for further actions that could be taken to limit access to critical materials in the future. As noted in China’s announcement, there will also be a stricter review of end-usage for graphite items shipped to the U.S., which makes up most of the material in the lithium-ion battery anodes used in electric vehicles, grid storage plants and consumer electronics. As the Center For Strategic and International Studies notes, China accounts for 77% of natural graphite production, over 95% of synthetic graphite production and nearly 100% of graphite refining. The United States, meanwhile, contains less than 15 of the world’s graphite reserves and is 100% import-reliant.
Should China choose to escalate its actions, banning the export of graphite, lithium and copper – all critical materials used in power transmission lines, solar panels, wind turbines, electric vehicles and many electrification developments – is a possibility.
Trump’s Agenda And Possible Outcomes
President Trump’s move toward American economic and industrial independence could shift the critical materials market. Beyond engaging in a trade war with China and the previously mentioned potential implications, Trump has been vocal about his willingness to remove the U.S.’s financial and military contribution to the North Atlantic Treaty Organization (NATO). Should this occur, regions such as Europe would need to accelerate their strategic options in safeguarding critical materials needed for military applications. Conversely, resource-rich nations may be less inclined to share these resources, keeping them for their own interest or selling them to the highest bidder. Ultimately, the president's actions could redefine market dynamics for critical materials and reshape global supply chains and geopolitical partnerships, ushering in a more insular and competitive ecosystem for global resources.
Investing In Critical Materials Now
The global landscape is shifting, with the U.S. moving toward greater energy and resource independence, and potentially forcing other nations to take similar actions to ensure their own resource supplies. As governments increase their demand for critical materials, the companies and entities capable of supplying them will likely continue to grow. For investors who believe in the growth story, now may be an opportune moment to gain exposure to investment solutions that provide pure-play1 exposure to a broad range of critical materials and mining equities essential to electrification and power generation.
Sprott offers several ETFs that provide exposure to a diverse range of critical materials, including uranium, copper, lithium, nickel, cobalt, graphite, manganese, rare earths and silver.
A key part of the energy independence narrative is nuclear energy, and essential to nuclear energy is uranium, a very heavy metal that can be used as an abundant source of concentrated energy for nuclear reactors. The Sprott Uranium Miners ETF (ARCA: URNM) provides investors with exposure to companies that devote at least 50% of their assets to the uranium mining industry, which may include mining, exploration, development and production of uranium, or holding physical uranium, owning uranium royalties or engaging in other, non-mining activities that support the uranium mining industry, by tracking the North Shore Global Uranium Mining Index. The index is designed to track the performance of companies that devote at least 50% of their assets to the uranium mining industry, which may include mining, exploration, development and production of uranium, or holding physical uranium, owning uranium royalties or engaging in other non-mining activities that support the uranium mining industry. Meanwhile, the Sprott Junior Uranium Miners ETF (NASDAQ: URNJ) reflects the performance of mid-, small- and micro-cap companies in uranium mining-related businesses.
Copper’s exceptional electrical conductivity and contribution to energy efficiency make it a critical element in energy transmission. It possesses the necessary physical properties to transform and transmit energy derived from sustainable sources – electromagnetic (solar), kinetic (wind) and geothermal – to their useful final state, such as moving a vehicle or heating a home. Both the Sprott Copper Miners ETF (NASDAQ: COPP) and the Sprott Junior Copper Miners ETF (NASDAQ: COPJ) provide pure-play exposure to a broad range of copper miners potentially positioned to capitalize on the increased demand for copper and its usage in electrification.
Though both funds share a thematic focus on capitalizing on the growing demand for copper and its integral role in transitioning to a carbon-neutral society, COPP provides comprehensive exposure to mining companies across the large, mid- and small-capitalization spectrum. In contrast, COPJ predominately focuses on small copper miners with significant revenue and asset growth potential.
The lithium market is of pressing interest to a world looking to replace internal combustion engine vehicles with electric vehicles (EVs) in the decades to come. Estimates put the global market for lithium at $7 billion in 2022, and some project that it will reach more than $22 billion by 2030. For investors seeking pure-play exposure to the lithium industry, the Sprott Lithium Miners ETF (NASDAQ: LITP) is a turnkey solution that tracks the Nasdaq Sprott Lithium Miners™ Index, which is designed to track the performance of companies that derive at least 50% of their revenue and/or assets from mining, exploration, development or production of lithium. The index generally consists of 40 to 50 constituents.
Another mineral key to electrification, as stated by the Nickel Institute, is nickel. The major advantage of using nickel in batteries is that it helps deliver higher energy density and greater storage capacity at a lower cost. Further advances in nickel-containing battery technology mean it could be set for an increasing role in energy storage systems, helping make the cost of each kilowatt-hour (kWh) of battery storage more competitive. Ultimately, this will allow energy derived from sustainable but intermittent sources, such as solar and wind, to be captured and stored more efficiently. The Sprott Nickel Miners ETF Fund (NASDAQ: NIKL) seeks to provide investment results that reflect the total return performance of the Nasdaq Sprott Nickel Miners™ Index. The index is designed to track the performance of a selection of global securities in the nickel industry, including nickel producers, developers and explorers.
Finally, for investors seeking an investment solution that provides comprehensive exposure to all critical minerals, the Sprott Critical Materials ETF (NASDAQ: SETM) provides pure-play access to a range of critical materials essential to generating, transmitting and storing clean energy. The ETF’s investment results will reflect the total return performance of the Nasdaq Sprott Critical Materials™ Index. The index is designed to track the performance of a selection of global securities in the energy transition materials industry.
(1) The term “pure-play” relates directly to the exposure that the Funds have to the total universe of investable, publicly listed securities in the investment strategy.
Featured photo by Albert Hyseni on Unsplash.
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SPT001326 – 1/15/26
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