Australian Prime Minister Anthony Albanese has announced that if his party wins the upcoming election, it will spend 1.2 billion Australian dollars (£580 million) to create a strategic reserve of critical minerals. This promise follows China’s decision to impose export restrictions on seven rare earth elements that are essential for the production of electric vehicles, fighter jets, and robots. Although China’s restrictions will affect all countries, the move is widely seen as a response to tariffs imposed by U.S. President Donald Trump.
Rare earths refer to 17 chemical elements that are called “rare” not because they are scarce, but because they are difficult to extract and process. Elements such as samarium and terbium are essential for manufacturing technologies that will shape the future global market, from electric vehicles to high-tech weapons systems. Both China and Australia have rare earth deposits, but China controls about 90% of global processing, the stage that prepares minerals for use in technology. This distribution of resources gives China leverage over supply chains.
Experts point out that Washington’s inability to secure a reliable supply of rare earths has made the mineral issue one of the Trump administration’s main focuses, especially amid growing U.S.-China diplomatic tensions. According to the U.S. Geological Survey, between 2019 and 2022, 75% of the rare earths imported into the U.S. came from China. Notably, the United States and Ukraine have signed an “economic partnership agreement” that will give Washington access to Kyiv’s mineral resources in exchange for establishing an investment fund in Ukraine.
Philip Kirchlechner, director of Iron Ore Research, told the BBC that Western countries were late to recognize the importance of rare earths. This allowed China to quickly establish a monopoly over processing. In the expert’s view, increasing Australian reserves won’t matter much if China still controls the processing stage. Lithium, which is not classified as a rare earth but is essential for manufacturing batteries for electric vehicles and solar panels, is a good example. Australia produces 33% of the world’s lithium but processes only a small portion of it and exports the rest. China, meanwhile, mines 23% of the world’s lithium but processes 57% of it, according to the International Energy Agency.
Despite initiatives to boost Australia’s mining and processing capabilities, according to Washington’s Center for Strategic and International Studies, the country will likely remain dependent on Chinese processing at least until 2026. In articles published in Australian media, China’s ambassador in Canberra criticized Washington’s global trade policy and called on Australia to “join” Beijing. Australia quickly responded negatively to China’s appeal.
Australia is also leveraging its natural resources in negotiations with the Trump administration. For example, exports of several types of critical minerals have been exempted from the 10% tariff imposed on most Australian products.
Experts believe that Albanese’s plan is mainly aimed at protecting Australia and its allies from potential threats from China. Natixis chief economist Alicia García-Herrero told the BBC that Albanese’s strategy is “more sophisticated” compared to previous plans because it allows the country to supply its resources to international markets during times of economic tension.
In the context of reduced Chinese exports, García-Herrero said Australia will sell more minerals on the market, helping to ease price increases and weaken China’s influence. However, she also noted that Australia will not be able to fully replace China.
