US-Australia Sign $8.5 Billion Rare Earth Agreement To Counter China’s Export Controls 

As per the agreement, both Australia and the US will invest $1 billion each over the next six months towards mining and processing projects.  

US President Donald Trump and Australia’s Prime Minister Anthony Albanese came together on Monday to sign a key agreement on critical minerals, which could counter China’s dominance. The Trump administration is pursuing strategic routes to offset China’s influence in the Indo-Pacific, with the US also backing a nuclear-powered submarine deal with Australia. 

After months of negotiations, the two countries signed an $8.5 billion critical minerals deal, which Albanese described as ‘a pipeline we have ready to go.’ Trump added that with this deal, a year from now, rare earths will be so abundant and ‘you won’t know what to do with them.’ 

There was a rough start to the evening with Trump confronting Australia’s US ambassador, Kevin Rudd, a former prime minister, about his past criticism of him. In 2020, Rudd described Trump as the ‘most destructive president in history.’ However, the rest of the event went by smoothly, with the signing of this deal being hailed as a diplomatic victory by both parties.  

As per the agreement, both countries will invest $1 billion each over the next six months towards mining and processing projects. They will also agree upon a minimum price floor for minerals, which Western mining groups have long advocated for. According to a White House statement, these investments would be directed towards deposits of critical minerals worth $53 billion, although details regarding the location or which types of minerals have been withheld. 

The US government’s export credit agency, the Export-Import Bank (Exim), issued seven letters of interest, totalling over $2.2 billion, to advance critical minerals projects in Australia. These letters went to Arafura Rare Earths, Northern Minerals and Latrobe Magnesium, amongst others. Exim Bank also said that these critical minerals are essential to advanced defence systems, building aerospace and communication equipment, and improving industrial technologies. 

The US believes that these investments would enable the rejuvenation of a high-tech manufacturing base in the country, while improving the West’s supply chain resilience and offsetting China’s export dominance. With Beijing officials blocking gallium exports to the US last December, the Pentagon has announced that it aims to build a gallium refinery in Western Australia.  

According to data from the US Geological Survey, China is home to the world’s largest rare earth reserves, but Australia is not far behind. This includes a range of minerals like lithium and nickel, which are essential to build EVs, aircraft engines, and military radars. 

As trade tensions between Washington and Beijing are escalating over the threat of Trump tariffs, China has countered these protectionist policies of the White House by tightening export controls over rare earths. Therefore, the US is now compelled to find alternatives to increase its access to these minerals. 

Trump’s decision to support the $239.46 billion AUKUS agreement also came as a surprise, but a welcome move as part of his larger plans to protect US interests in the Indo-Pacific. The agreement states that Australia would buy American nuclear-powered submarines in 2032 and then collaborate with Britain to build a new class of submarines.  

Trump made it clear that he would accept the deal, even if he wanted to undo decisions from the Biden administration, months after his team began looking into the AUKUS submarine arrangement due to worries about the US’s capacity to equip its own submarines. 

During trade talks with the US in April, resource-rich Australia offered privileged access to its strategic reserve because of its ambition to harvest and process rare earths. Trump and Albanese agreed to expedite mine, processing, and other operational permits to increase output as part of the rare earths agreement. In addition to mineral recycling and geological resource mapping, the agreement included protections against the sale of vital mineral assets, citing national security reasons.