The United States and Australia have solidified their partnership in a bid to counter China's dominance in the rare earth minerals market, signing a critical minerals agreement at the White House. The deal, finalized after months of negotiations, signifies a major step towards establishing resilient, allied mineral supply chains and reducing dependence on adversarial nations.
The agreement, described as an $8.5 billion deal by President Trump and Prime Minister Albanese, underscores the U.S.'s strategy of collaborating with global allies to challenge China's stronghold, particularly as China increasingly leverages its dominance in rare earth materials. Beijing's recent imposition of stricter export controls on rare-earth magnets, requiring foreign companies to seek government approval for exports containing even trace amounts of Chinese-origin rare earths, has amplified concerns. The Trump administration views this as a move by China to exert broad control over the global economy via the tech supply chain.
Under the agreement, the U.S. and Australia will invest over $1 billion each within six months to accelerate mining and processing projects. The plan encompasses resource extraction, processing facilities, recycling programs, and joint research into innovative mining technologies. A key aspect of the agreement involves establishing a minimum price floor for critical minerals, a measure long advocated by Western producers to prevent market manipulation.
Australia's role is pivotal in this initiative. The country holds the world's fourth-largest reserves of rare earths and is home to Lynas Rare Earths Ltd., the only major producer of heavy rare earths outside of China. In May 2025, Lynas achieved a significant milestone by becoming the first company outside China to produce commercial quantities of dysprosium oxide, a crucial heavy rare earth element, at its facility in Malaysia. Furthermore, Australia was the top destination for rare earth exploration in 2024, securing $64 million, approximately 45% of global investment.
The agreement specifically focuses on capitalizing on existing mining and processing operations in both countries, with new capacity expected to become available in 2026. The Pentagon will fund the construction of a new advanced gallium refinery in Western Australia, capable of producing 100 metric tons annually. This is particularly significant as China, which previously halted gallium exports to the U.S. last year, currently dominates global production. The refinery aims to bridge this gap and bolster the supply of this key ingredient for semiconductors and advanced weapon systems.
While the agreement signifies a crucial step, experts caution that it will take years, if not decades, to develop a sufficient supply of rare earths outside of China to truly diminish their dominance. One expert noted that China possesses almost a 40-year head start, suggesting it could take at least a couple of decades to catch up in terms of establishing independent supply chain processes. The agreement underscores the importance of continued investment in developing mining and processing projects, not only in Australia but also in other friendly nations. Central Asia, with its significant rare earth reserves and existing initial development work from the Soviet era, presents a promising avenue for investment.
