The US and Australia have agreed a multi-billion dollar critical minerals deal in a bid to bolster their own supply chain amid China’s dominance in the area. The meeting of leaders in Washington also prompted renewed support for their military submarine deal with the UK – AUKUS.
Elsewhere, UK chancellor Rachel Reeves headed to Birmingham to speak at a regional investment summit, as poor economic news continues to dog pre-Budget headlines.
Critical mineral collaboration
Australia and the US yesterday (20 October) signed a landmark critical minerals deal, designed to bolster tech, defence and other commercial supply chains amid China’s dominance in the sector.
Following the first formal meeting of Australian prime minister Anthony Albanese and US president Donald Trump, both countries pledged at least US$1bn to be filtered into US- and Australia-based rare earth projects over the next six months. A pipeline of projects worth a total of $US8.5bn also confirmed under the deal.
This includes a gallium refining plan in western Australia. Gallium is required in semiconductor manufacturing and became subject to Chinese export controls at the end of 2024. Currently China accounts for 94% of the world’s production.
Arafura Rare Earths, a mining project near Perth, is set to receive a AUS$100m equity investment from the Australian government to produce neodymium and praseodymium, rare earth oxides necessary in the production of magnets.
Earlier this month, China introduced stringent new export curbs on products containing even small traces of its magnets, another supply chain it dominates. China is estimated to control about 70% of rare earths mining and 90% of the processing of the material.
AUKUS promises
Australian officials went into the meeting hoping to gain firmer US commitment to the Australia-US-US (AUKUS) defence pact to provide Australia with nuclear-powered submarines to increase its military capacity in the Pacific.
US support for the project was called into question when a review was launched earlier this year, helmed by a senior US official who had expressed doubts about the pact.
Trump said that the pact was “full steam ahead”. When asked whether Australia would in fact receive these submarines, he replied, “Oh no, they're getting them”.
He added that the US was “building a few more [submarines]” – a prerequisite of being able to sell its older Virginia-class models to Australia, per the terms set out in AUKUS.
However, discussing the implications of the review, US navy secretary John Phelan said it would “clarify some ambiguities” about the deal, which should ultimately make it “better”.
“It should be a win-win for everybody.”
He didn’t elaborate on how the pact would change.
Albanese said there had been discussions about taking the pact to “the next level” and thanked Trump’s administration for its continued support.
Investment summit
A regional investment summit in Birmingham today (21 October) will bring together 350 business leaders, with Reeves and business and trade secretary Peter Kyle set to speak.
Reeves had been set to push further deregulation, which the Treasury is positioning as the answer to persistent low-growth forecasts ahead of next month’s budget.
Politico also anticipates Reeves and Kyle will also be placing more emphasis on Brexit’s role in the UK’s poor growth. This follows Reeves remarks to financial leader at an IMF summit last week, and polling that suggests the British public is amenable to closer economic ties with the EU.
However, focus today has turned to the government’s latest borrowing figures. In September the government borrowed £20.2bn, a five-year high, which will require Reeves to raise £27bn through her Autumn Budget in order to meet her own fiscal rules.
This news adds to speculation that she’ll be breaking Labour’s manifesto pledge not to raise taxes on workers.
Other news in the headlines
- The US has opened a Section 301 investigation into Nicaragua, citing policies and practices that “burden or restrict US commerce”. The move opens the door for tariffs as high as 100%, as well as other punitive trade measures
- A lacklustre meeting between Ukrainian president Volodymyr Zelenskyy and Trump prompted renewed support among EU officials for their plan to use frozen Russian assets to fund Ukraine’s defence
Yesterday in Trade
- A look ahead to this week’s China-US meetings between top economic officials Scott Bessent and He Lifeng
- An update on progress on US-UK pharmaceutical negotiations, which could see an increase in NHS payments for US drugs
- More details on Reeves Brexit remarks to the world’s financial leaders
You can read more here.
