"Rare Earth War": Is Australia the Next Key Player? The Trump Administration Targets the "Vulnerability of China's Dependence"

"Rare Earth War": Is Australia the Next Key Player? The Trump Administration Targets the "Vulnerability of China's Dependence"

"Rare earths are more of a 'tool of control' than a 'resource.'" This perspective is bringing Washington and Canberra (the Australian government) closer together.


The real bottleneck of rare earths is not "mining" but "refining and processing."

Rare earths support the advancement of electric vehicles (EVs), wind power, robotics, smartphones, and defense equipment. However, the issue is not "where they are buried" but "where they can be separated, refined, and made into components like magnets."


The U.S. has a clear sense of crisis. China has a dominant presence not only in mining but also in the downstream processes of refining and processing, which it could leverage in diplomatic and trade scenarios.


In this context,Donald Trump's administration accelerated efforts to "reduce dependence on China," positioning Australia under the Anthony Albanese administration as a crucial piece.


A "binding agreement" in 180 days—tariffs and quotas if not reached

The U.S. proposed a framework to negotiate with trade partners regarding the import of processed critical minerals and their derivatives. The White House fact sheet specifies encouraging allies to adopt "price floors" during negotiations and taking further measures if agreements are not reached, implemented, or effective within 180 days.


Editorials suggest that if agreements fail, there could be swift actions involving tariffs, quotas, and minimum import prices, with the aim of demonstrating "seriousness" to investors and allies under "time-limited pressure."


The point is the idea that free trade alone cannot win in price competition against China's state-supported supply chain. If the market is "left alone," China could increase supply and lower prices to drive rivals out—this "weaponization of price" is being countered by institutionalizing a certain level of support.


The U.S.-Australia specifics: Gallium and rare earths, projects up to $8.5 billion

U.S.-Australia cooperation is not just rhetoric. Reports indicate plans to create projects worth up to $8.5 billion in the coming years, with $3 billion in investments initiated in the past six months (including U.S. and Australian funding and advanced gallium refining in Australia).


The backdrop includes export restrictions and conflicts over certain minerals like gallium, heightening the "realism" of the risk with China.


For Australia, this is seen as an opportunity to shift from being a "country that extracts and exports" to one that "processes and becomes a key in the supply chain." For example, one notable Australian project is the gallium-related project in Western Australia, and another is the rare earth project in the Northern Territory.


However, the "reality wall": Key mines are not yet operational

The challenge here is "time." The "Nolans" project by Arafura Rare Earths in Australia's Northern Territory, expected to symbolize breaking dependence on China, has seen its final investment decision (FID) postponed. Despite receiving public funds, the project is reportedly struggling to show definitive progress.


Prices are volatile, and negotiating financing terms is complex. Additionally, there are concerns that prices are being intentionally kept low to push out competitors, highlighting the reality that just "launching" a project is a significant hurdle.


In other words, even if political agreements are made first, mines, refineries, personnel, and permits may not keep pace. While optimistic statements like "supply will overflow in a year" circulate, experts warn that obtaining mining permits and setting up refining facilities will take several years.


Market reacts first: Stocks plummet amid "backtracking" on price support

Policies shake the market. At the end of January, reports that the U.S. was backing away from "minimum price guarantees (price floors)" for critical minerals led to a significant drop in Australian rare earth-related stocks. Lynas also fell, and the Australian government emphasized that it would not delay its "strategic stockpile (A$1.2b)." The stockpile includes antimony, gallium, and rare earths, expected to be operational by late 2026.


"Price support" influences investment decisions. If support becomes ambiguous, financing becomes even more difficult, while too strong support makes it seem like the "state is setting the market." Finding the right balance is at the heart of this policy debate.


SNS reactions: Expectations, irony, and environmental concerns

On social media, while there is agreement that "breaking dependence on China is necessary," doubts about feasibility and concerns about damaging Australia's relationship with China are also prominent.


(1) Caution about "lack of details"
On Reddit, posts with a mix of irony express concern about the lack of visible details in the agreement, sharing a sentiment of "we don't really know what the terms are."


(2) The "tightrope" of Australian diplomacy
Comments suggest that "the key task for the Australian Prime Minister is to not anger the U.S. while also not angering China," reflecting the view that resource diplomacy is more delicate than domestic politics.


(3) Concerns about the environmental impact of refining
There are also concerns about "refining being highly toxic, which is why it has been concentrated in China. Where and how will the environmental costs be borne?" questioning whether producing and consuming countries can handle the process without just "sugarcoating" it.


(4) Realism about "whether it will really materialize"
Large-scale projects only move forward when permits, funding, and facilities are in place. Considering the delays in local mining plans and the market's volatility in response to policy statements, there is a strong view that "the political framework" and "the industrial timeline" are separate matters.

What will determine "victory or defeat": The key is "downstream," "price," and "alliance."

This series of moves highlights the shift in resource competition from "mining volume" to "processing, refining, magnets, and components."


The U.S. wants to create a "price stabilization mechanism" with allies. Australia aims to become a "supply chain hub" through investment and stockpiling. However, if projects are delayed, political agreements will be ineffective, and only stock prices and public opinion will react first.


The 180-day deadline serves as both a "deadline" to advance cooperation and a "springboard" to impose tariffs and quotas if it fails.


This rare earth (critical mineral) strategy is not just about increasing resources. In an era where supply chains are weaponized, it is a battle over how to allocate alliances, investments, regulations, and environmental burdens—the blueprint for which is being contested.


Source URL

Related Articles