Weekend Edition: Is Australia America’s New best Friend?
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What is the new US‑Australia rare‑earths deal and why does it matter?
A rare earth deal and confirmation of the AUKUS defense agreement. That's how we kicked off this week. Good news for the US who wants to be less reliant on China. And good news for Australia because it could bring a whole heap of investment our way. So why were the markets not so excited? Is there skepticism that this deal won't actually see the light of day? Well, let's talk to someone with the history of making US Australia trade deals this week. The morning call. from NEB with Phil Dobby. The weekend edition. So on paper it looks good, doesn't it? A $13 billion deal between the US and Australia to secure supplies of rare earths and critical minerals with support for processing within Australia to reduce the US reliance on China for these minerals.
But how much impact is this going to have, and how quickly, and how does Australia tread that tricky path of helping the US decouple further from China without necessarily Wanting to decouple from China ourselves. After all, China is still Australia's largest export destination. James Caruso is a senior foreign policy advisor at the Centre for Strategic and International Studies in Washington. He spent quite a few years in Canberra as well, as a member of the team negotiating a free trade deal with Australia back in 2005. In all, he spent 25 years with the U.S. Department of of state. So welcome James. Uh we'll talk about the new deal in a moment. But first of all, that trade deal that you were part of back in two thousand and five, I mean, is that a bit redundant now?
I mean now we have tariffs of at least ten percent, obviously much more for steel and aluminium. So how much of that original deal still stands?
Huh. Well, that's a good question, Phil. Um It applies except where the president says it doesn't apply. So what what what can I tell you? We still have uh investment aspects that apply with Australia still has a special visa just for Australians who can work in the US uh for up to a year. No other country has that deal. Um at the end of the day, Australia still has the lowest tariff rates that are being applied under under the Trump administration. So Um with applies. It's a good question, Phil, but uh Australia's still doing pretty well relative to the rest of the world vis a vis the US.
And of course Australia um buys more from the United States than the US buys from it. It does. So you would have thought going into this deal, Australia would be in a strong position. But have they given too much away?
Well, l let's let's back up why Trump is doing this. So part of it is to drive manufacturing back to the US. It's why the critical minerals agreement actually plays into that narrative. So that's one. Two, it's also clear To many people. That this is a revenue raising policy for Trump more than anything else. He wants to keep taxes low on income for corporates and individuals.
How does the $13 billion agreement aim to reduce US reliance on China?
He needs to deal with a very large and growing US debt. Uh and he's come up with tariffs as a way to do it.
Right. And Australia, as we've said, isn't paying a great deal for that except for uh steel and aluminium. But surely if he needs these mineral resources and Australia has this balance of trade deficit, we'd be in a position to say, Well yes, as part of all of this, this is fine, but how about dropping those tariffs that we uh w you negotiated earlier in the year?
Well, it's clear the president is going to move in tariffs. Uh other countries have taken a run at it and failed. I think the Prime Minister made a a good decision. Uh rather than focusing too much on the tariffs, although I suspect he did raise it. And uh it's still an open question whether aluminium and and steel tariffs will be changed at all. It's let's work together to uh better integrate our supply chain for things that really matter, such as rare earths and critical minerals. Now the US investing at least a billion dollars into Australian entities is a pretty big deal and actually uh a first for the US Export Import Bank. to finance foreign entities because there are a export credit agency, they finance US exports.
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Chapters
8 chapters
1
What is the new US‑Australia rare‑earths deal and why does it matter?
0:01–2:52
2
How does the $13 billion agreement aim to reduce US reliance on China?
2:52–6:19
3
Why did markets react calmly to the rare‑earths and AUKUS announcements?
6:19–10:28
4
What role did James Caruso play in the 2005 free‑trade deal and the new partnership?
10:28–13:13
5
How is the US Export‑Import Bank financing Australian critical‑mineral projects?
13:13–16:27
6
Can Australia leverage the deal to lower steel and aluminium tariffs?
16:27–19:37
7
What are the risks of Australia’s continued dependence on China’s market?
19:37–23:00
8
Will the Trump‑era trade model survive future US administrations?
23:00–25:51