Trump Signs Critical Mineral Agreement with Australia

On October 20, President Trump signed a new agreement with Australian Prime Minister Anthony Albanese that would give the United States access to Australia’s critical minerals. Under the terms of the agreement, the two countries will invest together in mines and processing projects in Australia to help with the production of critical minerals for manufacturing and defense. Within six months, the United States and Australia will invest over $3 billion in joint critical minerals projects. According to the Associated Press, Australia has dozens of critical minerals that the United States needs, used in products from fighter jets and electric vehicles to laptops and smart phones. While Australia is a major source of rare earth minerals, it relies on China, its biggest trade partner, for their processing.

The Trump administration wants to shore up American supply chains as China has announced additional export restrictions on its rare earths, which it dominates globally, particularly in their processing. China currently controls about 70% of rare-earth mining, 90% of the separation and processing of materials, and 93% of magnet manufacturing. Rare earths are found in everything from defense equipment to computer chips and cars. Trump’s backing of Australia’s critical minerals in the $8.5 billion deal will bring much-needed financial support to the industry. Still, it will not mean an immediate shift of the supply chain away from China, nor will it immediately weaken China’s market dominance.

Recently, China announced that it will require foreign companies to get approval from the Chinese government to export products containing trace amounts (0.1%) of rare earth materials that originated from China or were produced with Chinese technology. If enforceable, it gives China broad power over the global economy by controlling the tech supply chain, severely disrupting Western defense and economic sectors. In response, earlier this month, Trump announced 100% tariffs on China “over and above any tariff that they are currently paying,” effective November 1.

This summer, the U.S. government promised MP Materials a price floor to protect against China manipulating prices, which China has done in the past to ward off competition and to become the major global rare-earth exporter. China has for decades dumped excess critical minerals onto the market to drive prices down, eliminating competition by forcing mining companies in the rest of the world out of business. According to The Indian Express, in 2010, China restricted rare-earth exports to Japan over a fishing trawler dispute, and more recently to the United States between 2023 and 2025. China has had almost a four-decade head start on other countries in rare earth development, as it designated rare earths as a “protected and strategic mineral” in the 1990s.

In recent months, the Trump administration has announced investments in U.S. rare earths miner MP Materials and Canada’s Trilogy Metals and Lithium Americas, which have projects in the United States, and it has received ownership stakes in the firms for its support. Australia’s Lynas Rare Earths was awarded a contract by the U.S. Defense Department in 2020 and is working on a project in Texas to develop a commercial heavy rare-earth separation facility, which is expected to be operational in financial year 2025.

Australian officials warned that because Australia cannot supply all the U.S. critical mineral needs, the United States should continue to invest in long-term efforts to develop other mining and processing projects both at home and in allied nations. According to data from the U.S. Geological Survey, Australia rare earth reserves are only about one-eighth of Chinese reserves, and its mine production is around 5% of Chinese production. As reported by the Associated Press, Australian officials indicate that Central Asia has significant rare earth reserves, and the Soviet Union began some initial development when it controlled the territory, which would cut years off the time it would take to build a new mine.

The U.S.-Australia Deal

According to The Indian Express, as part of an $8.5 million deal, the Australian Prime Minister’s Office announced funding for two priority critical minerals projects. The first is the Alcoa–Sojitz Gallium Recovery Project in Wagerup, Western Australia, expected to supply 10% of the world’s gallium. Gallium is vital for defense and semiconductor production. The United States has not produced any primary gallium since 1987, while China currently dominates global output, as the metal is typically derived as a by-product of aluminum refining. Australia plans to invest up to $200 million in the Alcoa project, with the United States taking an ownership stake. Japan is also participating, having already covered 50% of project costs.

The Indian Express reports that Australia also announced a $100 million equity investment in the Arafura Nolans project in the Australian Northern Territory, with the project estimated to produce 5% of global rare earths. Nolans is one of the world’s largest undeveloped neodymium and praseodymium resources and plans to be Australia’s first fully integrated mining and rare earth separation project.

Analysis

The threat that China poses to critical mineral supply chains means that the U.S. needs to be diligent in permitting new domestic mines and looking for new opportunities abroad to shift production. The U.S.’s joint nuclear submarine and advanced capabilities security pact with Australia and the United Kingdom, known as AUKUS, makes the former a smart choice for investment, as critical minerals are needed for advanced military and consumer products. Furthermore, while critical mineral mining is less of a concern than processing — given China’s overwhelming market share of this space — the profitability of mining should give companies the ability to develop processing capacity as well.

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