【By Guan察者网, Yuan Jiaqi】

This week, the United States and Australia signed an $8.5 billion critical minerals agreement. U.S. media has been hyping up the deal, saying it "aims to counter China." Trump was overjoyed, immediately asking for champagne and boasting that in a year, the mineral resources would be so abundant that "you wouldn't know what to do with them."

However, after the celebration, some people suddenly realized: is the U.S. trying to build a system that can replace China's rare earth and critical mineral supply chain? But why should Australian taxpayers' money be used to solve other countries' problems?

Thomas Kruemmer, a director of Ginger International Trade & Investment, a trade and investment company specializing in rare earths, raised this soul-searching question. He also emphasized to the Financial Times, "Australia itself doesn't have a rare earth market."

The Financial Times reported on the 24th that analysts pointed out that high energy and labor costs make the construction cost of Australia's rare earth refining plants almost five times higher than those in Asia. To stimulate the development of the rare earth industry, the Australian government provides subsidies for related projects, such as significant support for the Iluka Resources refinery project in Western Australia, which received 1.8 billion Australian dollars in investment. However, whether these subsidies are enough to make Australia's rare earth products competitive with China remains a big question mark.

The report also mentioned that after the U.S.-Australia agreement was signed, the stock prices of some Australian mining companies rose sharply, but some small businesses still struggled to obtain financing. The reason is still investors' concerns that they cannot compete with China's mature and powerful rare earth industry.

Multiple data show that China dominates the rare earth mining and production. Bloomberg map

On the 20th local time, U.S. President Trump met with Australian Prime Minister Albanese at the White House and signed an $8.5 billion critical minerals agreement. U.S. media said the agreement "aims to counter China."

According to the copy of the agreement released by both governments, the U.S. and Australia will each invest $1 billion in mining and processing within the next six months, while setting a "price floor" for critical minerals.

After the agreement was signed, Trump opened champagne early. He told reporters that day, "In a year, we will have so many critical minerals and rare earths that you won't know what to do with them." He also said that Australia had always paid "very, very low tariffs."

Last Friday, Australian Treasurer Jim Chalmers told reporters in Washington, "We know U.S. companies urgently need critical minerals, and Australia is well-suited to meet this demand."

Dominic Raab, former UK Deputy Prime Minister (Lan Tao Wen), now serves as the Global Affairs Director at the London-based investment company Appian Capital. According to the Financial Times, the company invested in Gippsland Critical Minerals, a critical minerals company located in eastern Melbourne.

This former senior British politician, who repeatedly interfered in China's internal affairs during his tenure, still hasn't changed his double standards, taking a stance on rare earth subsidies. At this moment, he no longer emphasizes the power of the market, but instead argues that subsidies are "necessary" to promote the development of the rare earth industry.

When the rare earth market was not favorable to the West, Raab claimed that "the market mechanism has failed." He also said, "The challenge facing the entire Western world is how to build these supply chains."

However, international industry experts generally believe that although Australia has large reserves of rare earths, its production infrastructure is underdeveloped, making processing relatively expensive, and its talent pool is not as strong as China's. Some scholars say that the U.S. needs 10 to 20 years to build a safe and independent supply chain.

Marina Zhang, a researcher on critical minerals at the University of Technology Sydney, frankly said, "Even if the U.S. and all its allies take rare earth processing as a national project, I would say it will take at least five years to catch up with China."

Philip Ivanov, an Australian geopolitical scholar and founder of the consultancy firm "Geopolitical Risk and Strategic Practice," also agreed, stating that the U.S.-Australia critical minerals agreement lacks details, and the two countries may need decades to compete with China.

He is more concerned that China has the ability to take "retaliatory" measures, including directly banning the export of Australian iron ore.

The report mentions that China is Australia's largest trading partner, accounting for nearly one-third of Australia's exports. According to Australian government data, bilateral trade reached nearly $202 billion last year.

"Will China retaliate against Australia? Will it impose import restrictions on Australian iron ore? Or will China take other 'asymmetric' responses and affect other areas of Sino-Australian relations?" Ivanov said.

"Pricing will also be a key issue; China will not sit idly by as the U.S. and Australia disrupt its current competitive market position," he added.

Regarding the U.S.-Australia critical minerals agreement, Chinese Foreign Ministry spokesperson Guo Jia Kun stated on the 21st that the formation of global supply chains is the result of market and corporate choices. Countries with critical mineral resources should play an active role in ensuring the safety and stability of the industrial and supply chains, ensuring normal trade and cooperation.

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