The United States and Australia have embarked on a significant partnership to develop rare earth minerals, aiming to reduce China’s overwhelming dominance in this critical sector. In a meeting at the White House in October 2023, U.S. President Donald Trump and Australian Prime Minister Anthony Albanese signed an agreement that outlines $8.5 billion in projects focused on strengthening the rare earths supply chain.
Rare earth metals play a crucial role in various industries, including the manufacturing of magnets for weapons, semiconductors, robotics, and electric vehicles. Currently, China produces approximately 70 percent of the world’s rare earth metals, controlling about 44 million metric tonnes of reserves. In comparison, Brazil has 21 million tonnes, India holds 6.9 million tonnes, and Australia has 5.7 million tonnes.
As a key ally, Australia is strategically positioned to expand its rare earths market with support from the U.S. Following the agreement, Albanese announced the establishment of three joint project groups, which will include companies like U.S. aluminium firm Alcoa. According to the agreement, the U.S. is set to invest $3 billion in mining and processing initiatives, which will also implement a price floor for critical minerals.
The White House has indicated plans to construct a gallium refinery in Western Australia, expected to have a capacity of 100 metric tonnes per year. U.S. investments in Australia are projected to unlock deposits of critical minerals worth an estimated $53 billion. Trump expressed optimism about the initiative, stating, “In about a year from now, we’ll have so much critical mineral and rare earths that you won’t know what to do with them.”
Despite these developments, experts have cautioned that establishing Australia’s rare earth metals market could take between five to seven years. Meanwhile, China remains a formidable player in the global supply chain, contributing to approximately 90 percent of the world’s rare earths refining capacity, around 69 percent of global rare earth mining, and an overwhelming 98 percent of magnet production.
In response to the U.S.-Australia deal, Guo Jiakun, a spokesperson for China’s Ministry of Foreign Affairs, stated that resource-rich nations should take proactive steps to maintain the stability of industrial and supply chains while ensuring normal economic cooperation. Earlier in October, China’s Commerce Ministry imposed new export restrictions on rare earths, citing concerns over their potential military applications. This included adding refining technologies to its control list and enforcing compliance from foreign producers using Chinese materials.
The rare earth market was valued at approximately $6 billion in 2024, according to analysis from Goldman Sachs. The financial institution warned that a disruption of just 10 percent in industries reliant on rare earths could result in economic losses exceeding $150 billion. Specific elements such as samarium, graphite, lutetium, and terbium were highlighted as particularly vulnerable to export reductions.
While Western producers like Lynas Rare Earths and Solvay could help alleviate some shortages, dependence on China remains high. Goldman Sachs emphasized the need for eight to ten years to develop new rare earth mines, underlining the requirement for advanced expertise and infrastructure, which many countries still lack.
The U.S. is not solely relying on Australia to mitigate its reliance on China. Discussions are ongoing regarding the establishment of a strategic reserve of rare earths and the support of domestic producers through price controls and tariffs. During a recent trip to Asia, Trump also signed agreements with Japan, Malaysia, Thailand, Vietnam, and Cambodia to diversify access to critical minerals.
In a related development, the U.S. and China reached a framework agreement aimed at halting the implementation of a 157 percent tariff on Chinese goods, potentially paving the way for a trade deal between Trump and Chinese leader Xi Jinping. While details of the agreement remain sparse, it is anticipated that discussions will include provisions related to rare earths.
Despite the potential for a trade agreement, the Trump administration is expected to continue its efforts to diversify its critical minerals supply chain, reducing dependence on China. Following months of strained trade relations, the U.S. is poised to invest in energy sovereignty, offering financial support to domestic companies while forming alliances with other nations across various energy sources.
