American President Donald Trump and Australian Prime Minister Anthony Albanese have signed an $8.5 billion critical-minerals agreement designed to cut reliance on China, which dominates the global supply of lithium, cobalt, and rare earths.

The deal, announced in Washington, forms part of a broader economic and security alignment between the two allies.

The funding represents a joint framework rather than a single pool of cash. Each government has committed at least $1 billion over the next six months.

The partnership will target investment across the entire supply chain, from mining and processing to advanced manufacturing.

Among the first ventures are Australia’s Arafura Resources Nolans mine in the Northern Territory, expected to meet around 4% of global demand for neodymium-praseodymium oxide, a key rare-earth material used in magnets.

There is also a proposed gallium plant in Western Australia that could supply roughly 10% of global production. Gallium is vital for semiconductors, and China halted its exports to the United States (US) in December 2024.

Officials say the agreement will include support for projects that become unprofitable during price crashes, echoing calls for a price-floor mechanism to counter China’s practice of flooding markets to squeeze competitors. Cobalt prices, for example, fell nearly 60% between 2022 and 2024, leading to the closure of the only US cobalt mine in Idaho.

Both governments will also streamline permitting to accelerate mine development, though details on which laws will change are still pending.

The urgency stems from China’s overwhelming lead: it mines about 70% of rare earths, refines 90%, and produces nearly all rare-earth magnets. Last year alone, Chinese firms invested more than $21 billion in overseas mining under the Belt and Road Initiative.

The announcement was paired with a reaffirmation of the AUKUS submarine programme, a joint defence arrangement between the US, Australia, and the United Kingdom.

Through the deal the US will provide Australia with nuclear-powered submarines starting in 2032.

Analysts at the Center for Strategic and International Studies argue that only a coordinated “anchor market” among US allies can sustain non-Chinese supply chains. Australia’s vast resources and shared democratic alignment make it Washington’s most crucial partner in that mission.