Lockheed Martin F-35 Lightning II fighter jet of the United States Air Force USAF.
NurPhoto via Getty Images
Rare Earths And Economic Security
The issue is that the U.S. imposition of tariffs on China, in a dramatic trade war, led China before May to ban the export of heavy rare earth metals to the U.S. In October, stricter export controls were put in place, which took the U.S. by surprise. This led President Trump to threaten 100% tariffs on all Chinese exports by November 1.
Why is this an issue? Rare earth metals are important for energy security and economic advancement. They are key to the strongest batteries used in wind turbines to make electricity, as well as electric motors in EVs. But rare earths are also critical pieces of economic advancement, such as semiconductor chips and robots. America’s race to lead in artificial intelligence (AI) has been fueled by its access to high-grade chips. Last, but not least, are U.S. defense systems that depend on rare earths: missiles, radar, and jet fighters. All of these applications could be undermined by China’s export bans.
But Australia, a close ally, also mines rare earths, and is one of just a few countries in the world that processes rare earths, other than China. The country, rich in minerals, is also advanced in energy technology. It leads the world in green electricity supplied by wind and solar and battery storage. Since 2023, one state, South Australia, has been operating its grid with 72% supplied by renewables.
Earlier this year, the government of Australia appointed sizeable funding that included mining and processing of rare earths. The overt goal was to shore up Australia’s security, but also with an eye to helping the U.S. which was threatened by the trade impasse with China.
Monday Meeting Between Trump And Albanese.
The Australian Prime Minister, Anthony Albanese, has waited 10 months to meet with President Trump about tariffs. Anxieties in Australia grew because of this delay, and uncertainties about the future of the massive AUKUS nuclear submarine project initiated by the Biden administration. Trump and Albanese on Monday signed an agreement that is a framework of plans to add a joint pipeline of projects for rare earths and critical minerals worth $8.5 billion.
Albanese clarified that Australia and the U.S. would contribute $1 billion over the next six months into projects that are readily available. The pipeline will include U.S. investment in processing of rare earths in Australia. One joint venture project includes Japan along with Australia and the U.S. The Pentagon will also be involved: they will invest in constructing a gallium refinery in Western Australia. Alcoa, an Australian company with huge alumina refineries, had already explored a gallium project with Japan.
What Are Rare Earths?
Rare earths are 17 elements at the upper end of the Periodic Table. They have funny names like yttrium, neodymium, and europium. They exist in lots of places around the world, but are very difficult to process to purity. Why are they important? Rare earths are used to make the best magnets used in phones, EV motors, wind turbines, and jet engines. TV and computer screens with rare earths show colors better. They are also key to advanced technologies in the medical field (MRI and laser surgery), as well as defense systems.
China Dominates In Rare Earths
Resources for rare earths usually contain radioactive elements, and this is why few countries have mines and even fewer will process the mined ore. Europe steered away from rare earth mines because of radioactive waste.
But China embraced rare earths after Deng Xiaoping famously stated in 1992: “The Middle East has oil, and China has rare earths”. China then began to focus on rare earth mining and processing using cheaper labor costs and lower environmental restrictions. According to the International Energy Agency (IEA), China produces 61% and processes 92% of the world’s rare earths. It’s easy to see that China controls the supply chain, and this is what concerns the west.
The Politics Of Rare Earths
Because of Trump’s tariffs, China retaliated in April by placing restrictions on exports of seven rare earths, the heavy rare earths. This is a big deal because the U.S. imported 70% of rare earths from China between 2020 and 2023. So in May, Trump wrote an order that the commerce department find ways to produce rare earths in the U.S. and not have to rely on imports from countries like China. The order quoted, “Critical minerals, including rare earth elements, are essential for national security and economic resilience.”
But in October, China put in place stricter export controls which took the U.S. by surprise. This led President Trump to threaten 100% tariffs on all Chinese exports by November 1. Prices of rare earths will surge in the U.S., and companies that make electronics (smartphones) and defense (missiles, radar and jet fighters) will be hurt. One simple truth makes this clear. An American F35 supersonic strike fighter jet uses 420 kilograms of heavy rare earths in building the plane.
Sadly, the U.S. is holding a poor hand in regard to rare earths. The country has only one mine that is operating, and no capacity to process the minerals—instead they were sent to China for processing. All this helps to understand President Trump’s ideas about exploiting Ukraine and Greenland for rare earths.
Can Australia Save U.S. Rare Earths
The prime minister of Australia, Anthony Albanese, pledged A$1.2 billion to build a strategic reserve for critical minerals, if he won the national election that was to be held in June. He did win. The reserve will contain critical minerals such as lithium and cobalt, top producers in Australia, but will also include rare earths. Albanese said the key would be minerals that are vital for the country’s security, and that of its partners.
This opened the door to the U.S., of course, where talks with Trump did exempt some minerals from the 10% tariffs laid on exports from Australia to the U.S. But a larger joint venture would have to wait until China’s stricter export controls for rare earths came down in early October. This was Albanese‘s chance, and he took it when he met with Trump.
What is Australia’s position in rare earths? One company, Arafura Rare Earths, out of Perth in Western Australia, received in 2024 nearly a billion dollars Australian to build the first combined mine and refinery for rare earths. In November of 2024, another company, Lynas Rare Earths, started its first processing plant, also in Western Australia. Lynas also has a processing plant in Malaysia and one being built in the U.S. But analysts said it could be 2026 before Australia stops depending on China’s processing.
Perhaps the most interesting venture is Iluka Resources that has mountains of tailings from its sand-mining enterprise north of Perth. They are finishing a plant to refine the tailings which are high in heavy rare earths. This will be the only facility outside of China that can deliver heavy rare earth metals.
Optimism about an alternative supply of rare earth’s for the U.S. has jumped, although the refinery processing of rare earth metals will still be controlled by China for the near term.
AUKUS nuclear submarine project.
The AUKUS agreement is a defense pact between the U.S., Australia, and the U.K., announced in September 2021. A primary goal is to enhance Australia’s nuclear submarine force to counter growing Chinese influence in the region. The plan is for the U.S to sell up to five Virginia-class attack submarines to Australia by 2032. Also, Australia and the U.K. will boost Australia’s naval fleet by building extra submarines. President Trump said after his meeting with Prime Minister Albanese he is looking at a faster timeline. It’s a massive agreement, with cost estimates of $368 billion for Australia alone.