Australia and EU seal trade deal, seek to cut reliance on China for critical minerals

Australia and the European Union signed a trade deal on Tuesday that was eight years in the making, removing tariffs for almost all European goods and for nearly all exports of Australian critical minerals.

The agreement comes after both sides stepped up talks in the wake of significantly higher U.S. tariffs under the Trump administration and more angst in the West over China’s dominant position in the supply of rare earths and other critical minerals. The two sides also signed an agreement to boost security and defence ties.

“The EU and Australia may be geographically far apart but we couldn’t be closer in terms of how we see the world,” European Commission President Ursula von der Leyen said in a statement.

“With these dynamic new partnerships on security and defence, as well as trade, we are moving even closer together.”

The agreement will remove over 99% of tariffs on EU goods exports to Australia, cutting 1 billion euros ($1.2 billion) a year in duties for companies. EU exports to Australia are now expected to grow by up to 33% over the next decade.

Australian Prime Minister Anthony Albanese told a news conference that the agreement would be worth about A$10 billion ($7 billion) annually to the Australian economy, adding that the removal of almost all import tariffs on Australian critical minerals into the European Union will help stabilise global supply chains.

“For both Europe and Australia, getting China right is a strategic imperative, and this is why bringing to life our critical minerals partnership will be crucial to our success,” von der Leyen told Australia’s parliament.

“We cannot be over-dependent on any supplier for such crucial ingredients, and that is precisely why we need each other.”

The deal also signals Europe’s growing engagement in the Indo-Pacific, after striking trade accords with Indonesia in September and India in January.