U.S. and Australia Deepen Critical-Minerals Engagement to Counter China
In July, US President Donald Trump reshaped Biden-era industrial policy. By scaling back parts of the Inflation Reduction Act, Trump’s One Big Beautiful Bill Act weakened incentives for electric vehicle uptake and reduced demand certainty for critical minerals. Without long-term offtake agreements, more projects could turn to Chinese financing, ironically reinforcing Beijing’s dominance just as Washington seeks to undermine it.
The US Department of Defense’s US$400 million investment in MP Materials provides a stark contrast. With a guaranteed minimum price nearly double China’s market rate, Washington showed that industrial policy can shield producers from market volatility and strategic manipulation. But the benefits have so far been ringfenced for US firms.
Australia’s Opportunity and Risk
Australia brings to the table what Washington needs: resource abundance, political stability and a proven record as a secure supplier. Yet Washington’s protectionist tilt risks eroding trust. The Trump administration’s March decision to reject a reciprocal access deal, which guaranteed US access to Australian minerals in exchange for relief on steel and aluminum tariffs, was a missed opportunity.
Canberra has signaled it will not wait indefinitely. Australian Minister for Resources Madeleine King has floated an Australian price floor for critical minerals. The move suggests a more assertive industrial strategy designed to keep value onshore and diversify partnerships if Washington remains narrowly focused.
Meanwhile, firms such as Lynas Rare Earths face an uneven playing field. While MP Materials enjoys guaranteed prices and Pentagon backing, Lynas must contend with volatile markets and Chinese oversupply. Unless US policy expands beyond its borders, allied producers may remain perpetually vulnerable.
The Trajectory Ahead
China’s export bans underscore that allies must move up the value chain, not just secure raw supply. The MP Materials deal proves that price guarantees can stabilize projects and protect against Chinese manipulation. Extending such mechanisms to allies would not only strengthen trust but also deliver the scale of supply diversification that Washington’s strategy requires.
In a marked shift, under the United States–Australia Critical Minerals Framework, announced on 20 October, both governments pledged over US$3 billion in joint investments within six months to advance projects valued at US$53 billion. The announcement follows a major milestone a month earlier, when the US made a historic investment in Australia’s critical-minerals sector through the US Export–Import Bank’s financing of RZ Resources’ Copi Project, the first US-backed Australian minerals venture in more than a decade.
As part of the agreement, the bank will issue US$2.2 billion in financing to unlock up to US$5 billion in total investment. In addition, the US Department of Defense backs construction of a 100-metric-ton-per-year gallium refinery at Alcoa’s Wagerup facility in Western Australia, developed with Japanese participation through the Japan Australia Gallium Associates, a joint venture between the Japanese Government and Sojitz Corporation.
Building on this momentum, the Australian government has committed a $100 million equity investment to the Arafura Nolans project in the Northern Territory, which is expected to supply about 5 percent of the world’s rare earths once it becomes operational.
Scale and coordination remain essential. Australia must move beyond isolated critical-minerals projects and develop an integrated corridor through Darwin with pre-structured offtake, pricing, and traceability frameworks aligned to US standards.
Looking ahead, the US–Australia framework could be broadened into a wider Indo-Pacific partnership that includes Japan, South Korea and India, leveraging each country’s strengths in processing, industrial capacity and market demand.
The challenge now is to turn investment pledges into integrated, resilient supply chains that extend across the Indo-Pacific and deliver lasting stability for all partners involved.
Alice Wai is a junior researcher at ASPI. This article is published courtesy of the Australian Strategic Policy Institute (ASPI).
