Australia Strikes Major Rare Earths Deal With US to Circumvent China

Australia and the United States just agreed on a major, $8.5 billion deal that will diversify America's supply of critical minerals and rare earths while benefiting the Australian economy.

The deal was confirmed on Monday after a meeting between US President Donald Trump and Australian Prime Minister Anthony Albanese at the White House. While the deal seemingly involves just these two countries, the bigger picture is much more complex.

The agreement is a framework for the United States to make investments into Australian rare earths projects, specifically into certain companies like Alcoa. One of the projects also involves Japan, with the three countries working together to ramp up Australia's critical mineral and rare earth exports.

Rare earths are specific elements on the periodic table like scandium, yttrium, and the lanthanides, located below the table. However, due to their usage in technology, defense, magnets, and the rapidly growing renewable energy industry, they have become increasingly valuable. Contrary to their name, "rare earth elements" are not actually rare, but they are found in extremely small deposits and are therefore very costly to extract and purify. Due to this, the term has also grown to encompass other critical minerals that have similar traits and uses, like gallium and germanium.

One of the largest new projects will be the creation of a massive gallium refinery in western Australia, which will have an export capacity of around 100 metric tons per year. Albanese stated that the deal would foster around $1 billion in investments over the next 6 months, but the official report released by the White House bumped this number up to $3 billion.

The move comes as the Western world attempts to move away from China's supply of critical minerals and rare earths– an industry that they continue to maintain a tight grip over. China contains around 60-70% of the world's total critical mineral and rare earth supply, including almost every element used in electronics and technology, but they also have around 90% of the world's rare earth refining and processing capacity.

Because of this, the US is highly dependent on China for its rare earths and critical minerals, an industry that it cannot afford to lose. When China announced that they were implementing export controls on rare earths earlier this month, it drew the ire of Trump, leading to the announcement of 100% tariffs on China by November 1 if they refuse to rescind the controls.

The move has sparked fear among Americans of another trade war, but Trump does not plan to be unreasonable. He is scheduled to meet Chinese President Xi Jinping in South Korea in several weeks to discuss the matter. Nevertheless, Australia is one of the few countries on Earth other than China that contains a significant supply of critical minerals and rare earths, and Trump is trying to diversify the industry's sources to move away from his dependence on China's goods.

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