What will happen when Albanese meets Trump? | Insiders On Background

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The long-awaited meeting between Anthony Albanese and Donald Trump is about to take place.

Pending any last-minute cancellation, the Prime Minister will be at the White House to meet the US President around 2am Tuesday Australian time.

So what should we expect?

Will there be a blow-up over defence spending or AUKUS?

Fears on that front do appear to have eased a little.

What about a deal on critical minerals?

The Trump administration has certainly become highly focused on access to rare earths after China flagged plans to seriously restrict its exports.

So I'm keen to explore what is likely to come out of this meeting and what the future holds in store for the US-Australia relationship under these two leaders.

I'm David Spears on Nunamol Country at Parliament House in Canberra.

Welcome to Insiders on Background.

Haley Channer is the the Director of the Economic Security Program at the U.S.

Studies Centre based at the University of Sydney.

Hayley Channer, welcome.

Thank you so much.

So look, before we dive into rare earths and critical minerals, let's just look at what Anthony Albanese is walking into at the White House here.

How would you describe the US-Australia relationship right now, some months into

the return of Donald Trump, and I guess some years now into the Albanese government's time?

Well, you'd expect the relationship to be really robust.

You know, Australia has a major trade deficit with the United States.

We're importing a lot more from the US than we're exporting to them.

Plus, we're key defence allies.

We've got a lot of basing here in Australia for US military and we're AUKUS partners.

So there's a lot of synergies and complementarities between our two countries and shared history.

But you're right, our Prime Minister is really walking into what could be a very difficult meeting in the Oval Office next week.

There's also a history of bad meetings in the Oval Office if you think about President Zelensky of Ukraine.

But we've also seen them done well, like with Kier Starmer earlier in the year.

So obviously our Prime Minister will want a really positive meeting and this also comes at a really difficult time in terms of Australian perceptions of the United States.

So at my centre, the US Studies Centre, we released some polling this week actually that shows that Australians don't trust the US administration.

Only 16% of Australians thinks the Trump administration has been good for Australia.

So our Prime Minister has to both balance his relationship with President Trump, knowing that all of those engagements and interactions will be beamed back to Australia next week.

Yeah, I mean it's an interesting point, right, because it's a relationship that he needs and Australia needs to work.

But at the same time, politically, Anthony Albanese would be well aware of those sort of figures you cite about how unpopular Trump is in Australia.

Maybe those numbers have improved a little after the Gaza ceasefire, but it's hard to know.

Look, on defence then, there have been these concerns that, well, we know Trump wants allies to spend more on defence.

He's berated some Europeans over this.

He got most of the NATO countries to lift their spending.

What about Australia?

We're not at the 3% or 3.5% of GDP the U.S.

wants us to be at, but we know the Australian government's been going to great lengths to explain that it is increasing spending.

It is giving the U.S.

access to all these improved bases and so on.

Is this going to be a flare-up, this issue?

Look, honestly, you can't tell what issue could be a flare-up.

It might be defence spending.

It might be Australia's pharmaceutical benefits scheme.

You know, that's been the issue of drug expenses in the United States has come up quite a lot recently.

So you can't tell, but Australia has done what it can to protect itself from that kind of criticism.

Our government was very strategic at the beginning of the year.

It sent the first tranche of funding to the U.S.

Defence Industrial Base to help support AUKUS.

And as I understand, another tranche of funding is on its way.

So our government is a very important thing.

Well timed for this meeting, perhaps.

Exactly right.

And also that Pentagon review of AUKUS, although it's not concluded yet, there are all positive signs out of the US administration.

And to be honest, when you have something like AUKUS, which is multi-decadenal, you would expect new administrations to be reviewing it to make sure it's in everyone's interest.

But yeah, you just don't know what issue is going to come up.

And it could just be an issue du jour that President Trump wakes up and decides you know he wants to have it out with the Australian Prime Minister in that moment.

However, I think our government's been preparing quite a long time and we'll have some major deal so that President Trump can focus on that, not a negative.

Yeah, expect the unexpected, I suppose, when stepping into that room.

Look, the issue du jour seems to be rare earths and critical minerals more broadly right now in the US after China announced a week ago of its plans to seriously tighten export restrictions on a lot of important rare earths that the U.S.

needs for military technology and so on.

Where has this left the US?

Can you just explain to us how vulnerable is the US on critical minerals and what does it really need?

Yes, this is a hugely complicated area as I've found out over the last sort of 12 plus months.

It is very, very hard to be a geologist, metallurgist at the same time as you're looking at foreign policy.

So in a nutshell,

we've known for quite a long time that critical minerals, including rare earths, rare earths is a subset of critical minerals.

Think of it like the yeast in a pizza.

You only need a tiny little bit of it, but if you don't have that yeast, you've got no pizza.

It's a very different pizza.

So that's actually what makes this area so fascinating is that the commercial case to actually do these minerals in bulk isn't there.

Countries like the US and other Western countries have outsourced this processing to China for decades.

And now China is turning the screws because it has invested so much in the whole supply chain of rare earths.

So for example, it has bought up mines in Africa, in South America.

And then people might remember China's Belt and Road initiative.

China's also built the roads, the railways, the ports

to export all of those minerals to China where China can do the processing and

manufacturing.

All the processing is in China from all these mines that it owns and operates around the world.

It brings it all back there to process.

That's exactly right.

I mean, so, for example,

the US is sort of 90 plus percent dependent on China for rare earths.

Wow.

And rare earths, like I said, there's a little bit in lots of things.

For instance, you might have them in defense applications, technology.

Critical minerals more broadly go into lithium-ion batteries or wind turbines.

Rare earths in particular go into magnets that you might find in

your AirPods or in wind turbines or in electric vehicles.

So they go into everything.

And earlier this year, we saw Ford in the United States.

It had to really slow its production of EVs because it didn't have access to China's rare earths.

And am I right in saying that as part of China's stranglehold on this market, even Australian critical minerals like lithium largely go to China to be processed there?

That's exactly right.

About 90% of Australia's lithium goes to China for processing.

I mean, Australia is, that's the main game that Australia is trying to do now.

It's trying to move into the midstream of processing, but processing is extremely environmentally damaging, or it can be.

And so, for example, there was a BBC report earlier this year that talked about some of the mines and the tailings from mines in China and the kind of chemicals that are used in the processing, you know, acid leaching, that kind of thing.

So that's why Australia and other countries don't want to do the processing.

It's why Australian companies like Linus do their processing in Malaysia, for instance.

And this is interesting, right?

Because we hear the government constantly talk about we want to get into the processing.

This is the value add part.

We don't just want to dig it up.

We want to process it here.

But this side of the debate, we haven't heard much about the environmental damage that comes with it.

Is there a way of avoiding that?

There are, but it's more expensive and it takes longer time.

So this is the difficult part is that for companies to be profitable, they would have to pass those expenses on to the consumer.

So when you think about it, people that buy EVs, for instance, are doing so because they're environmentally conscious.

They actually want to stop these carbon emissions.

But if they knew how much environmental degradation there was in the nickel mining in Indonesia, for example, you know, customers are unaware of that and those prices are not built into the cost of an EV.

That's a good point.

So given China has spent not years, but decades building up this market, dominating this market, Is it realistic to think that

the US and its allies, including Australia, can snap their fingers and set up an alternative supply chain that's going to be more environmentally friendly easily?

Or

is this pretty far-fetched to think that it's going to be that easy to set up something separate?

It's not far-fetched.

We can definitely do it.

I mean, Australia has already been doing it with Linus in Malaysia.

They're doing rare earth separation and the US has also engaged Linus

to set up a processing facility in Texas for example

but these are skill sets and technical know-how that hasn't existed in a lot of countries for a long time in Japan for example I heard one story that they had to get this poor 80 year old man out of retirement to come and teach them again the processes that he used back in his day so the knowledge exists and there can also be new technologies developed.

What Australia and the US could do together, for example, could be some pilot processing and infrastructure, whether that's in Australia or the US, but they do need to work as quickly as they possibly can.

And the other thing to note, David, is that there's two challenges.

Basically, there's the short-term challenge, which is stability of supply, but then there's a long-term critical mineral challenge, which is responding to the market failure of lack of diversity in the supply chain.

So I think there'll be some people focused on the long game.

A lot of people are focused on the short game.

And there's also a difference between commercial and defence.

So in the commercial space with Ford, they have just-in-time supply chains.

With the U.S.

Department of War, it has stockpiles.

So there's some security for national security, but they still need to get after this.

So that brings us to what Australia...

can offer, is offering, should offer.

We know the Albanese government announced before the election a $1.2 billion critical mineral strategic reserve.

Now,

as far as as I'm aware, the details are still being worked out.

Maybe this is part of negotiating with the US on exactly what it looks like.

What do you know about this reserve and what Australia is essentially offering here?

So the US government will have a very clear understanding of Australia's offer, but as the public, we don't know what's in the deal yet.

And that could also give our government some flexibility in negotiating directly with President Trump next week what he wants to be in it.

There are many different things that could be in the reserve.

Like it could be a physical reserve of stockpiles.

Like an actual stockpile of

stuff.

But that brings its own challenges because do you have the concentrate

or do you have actual processed minerals in your stockpile?

Having sometimes the raw ore can be bad because it can oxidize.

But the other thing that the stockpile could be is a virtual stockpile when actually you do sort of real-time data management and you're managing stockpiles elsewhere.

It could be used like a working capital facility where that $1.2 billion helps plug short-term supply gaps in different companies' supply chains.

Really, a lot of options are on the table and Australia is working, it's working with the private sector, it's working with international partners to determine what should be in the stockpile.

And that's the really difficult thing about this is that China controls so many minerals that you have to be strategic in what you actually use the stockpile for.

As in we're not going going to try and do this for every single rare earth or critical mineral.

Exactly right.

Yeah, okay.

And Australia's got more than 30 that it classifies as critical.

The US has got more than 50.

Interesting.

And then the idea of a floor price as well that we've heard about, can you just explain what that means?

Yes, so essentially,

if there is a lot of a particular mineral in the market because China's able to flood the market with its minerals.

It's a critical.

Exactly.

The price of that mineral will will drop significantly.

And so, if there's an Australian company that has a particular mineral it's trying to sell in the global marketplace, the price of that mineral might drop substantially.

So, providing a floor price gives companies some security, it gives investors security that they're not going to lose a lot of money from their investment.

So, case in point, earlier this year, the US government has propped up a company in the US called MP Materials.

It set a floor price for their rare earths twice the market value.

A lot of people outside of government have criticised that because that's a lot of money to give this one company.

And the US government has said privately, don't expect other deals like this.

And you can't give a floor price to everyone because you would bankrupt a country.

So it is very difficult.

And it goes back to the point I mentioned earlier, which is you only need a tiny, tiny amount of these minerals.

You can't really use them in bulk.

And a floor price puts the taxpayer on the hook.

In the American example you give the American taxpayer, what we're talking about would be the Australian taxpayer.

But

given the distortions in this market and the need for these rare earths and critical minerals for defence and higher manufacturing, is it fair to say that this sort of taxpayer investment and involvement is necessary?

Honestly, I think the answer is 100% yes.

Australia is very, very lucky to have the critical mineral and rare earth miners that we do have, your Alucas, Arafuras, Linus, others.

Because all of these minerals underpin everything.

They underpin the clean energy transition.

They underpin AI.

They underpin defence.

If we didn't have them...

we would be really stuck if China decided not to sell those products to other countries, which we then buy from.

I take the point though, you know, Australia's got all of these other expenses.

You know, it's got NDIS, housing, aged care, it's got orcas to pay for.

But you do need to make some interventions in the market because of where we are now globally.

Other countries are intervening in their markets in ways we haven't seen for a very long time.

It's an unfortunate reality, but if we don't do it, we will not be capitalising on this incredible sovereign resource we have.

And just to come back to the US interest here, it does look like they're, you know, scrambling, might be overstating it, but they're very keen to find alternative supply chains to wean themselves off China here.

Is the Pentagon directly investing in rare earths projects and could the Pentagon invest in projects here in Australia?

Yes, so that's what I said before about the Department of War, also the Pentagon.

So yes, it is making investments.

Inside the Pentagon, there is a venture capital arm of the Pentagon.

It's called the Office of Strategic Capabilities, OSC, and it makes strategic investments, decisions.

It's made it in MP Materials.

And then there's also other government agencies like Department of Energy that has made strategic investments in mines and critical minerals outside of the U.S.

We could have a Pentagon-owned mine in Australia, bottom line.

I wouldn't think of it as a Pentagon-owned.

It would be U.S.

government-owned.

I mean, we have lots of Australian companies.

that are part owned by somebody else, including China.

So it's just about the commercial realities.

Yeah.

And the U.S.

Secretary,

the Treasury Secretary, Scott Besant, said just yesterday that the U.S.

does want to work with Australia and other other allies to de-risk and diversify supply chains from China as quickly as possible.

In fact, he said, if China wants to be an unreliable partner to the world, then the world will have to decouple.

Now,

that was his quote.

I think he went on to say, look, the world doesn't want to decouple.

Australia doesn't want to decouple from China completely here, does it?

We rely so heavily on trade with China for our economic strength.

But

it seems like the Trump administration might put some pressure on Australia to perhaps not completely decouple, but to stop selling lithium to China.

Definitely what I heard when I was in Washington recently was that is the main concern of the United States, how close Australia is with China economically.

The problem is that nobody else is buying in a way that China is buying.

Even when China stopped buying our beef, barley, copper, coal, wine, lobster, a lot of those industries have gone straight back to China because because that is where they get the most returns.

So it is very, very difficult to wean ourselves off China.

But ignore the United States for a minute.

Look at things like the COVID pandemic.

COVID showed us that relying on one partner, any one partner, China or somebody else, is not the way to go for national security.

You need to diversify your supply chain.

So even if you take the geopolitics out of it, Australia needs to diversify its supply chains.

So I think that's the way to look at it is it's not just Australia wanting wanting to do this, it's not just the US.

Japan, South Korea, European nations, they all need to diversify.

I mean this is the end of globalization.

It's what happened over the last several decades was all of our countries getting more and more economically integrated so we could buy the things at the cheapest price.

Now because of geopolitics, countries vying for more global power, we are all kind of decoupling because we have to.

Fascinating moment and this meeting between the two leaders on this issue will be really interesting to watch as well.

Haley Channer, really appreciate your insights, both in terms of geostrategy but also your geological insights as well.

Thanks so much.

Thank you so much, David.

All right, if you have any thoughts on this conversation, drop us a line, insiders at abc.net.au.

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