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

SYDNEY - Australia and the European Union signed a trade deal on March 24 that was eight years in the making, removing tariffs on almost all European goods and on nearly all exports of Australian critical minerals.

But some Australian agricultural products like beef and sheep meat, for example, will be subject to export quotas, and Australian farmers sharply criticised the pact for delivering “subpar” access to the bloc.

The agreement comes after both sides stepped up talks in the wake of significantly higher US 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 per cent of tariffs on EU goods exports to Australia, cutting €1 billion (S$1.48 billion) a year in duties for companies.

EU exports to Australia are now expected to grow by up to 33 per cent over the next decade.

Australian Prime Minister Anthony Albanese said at a news conference that the agreement would be worth about A$10 billion (S$8.9 billion) annually to the Australian economy, adding that the removal of almost all import tariffs on Australian critical minerals into the EU 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,” Dr 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 2025 and India in January.

Australia agrees to beef quotas

Australian tariffs will drop to zero for European wine, sparkling wine, fruit and vegetables and chocolates from day one and for cheeses over three years.

The EU will remove tariffs on many agricultural products but some key exports will have quotas.

For beef – one of the biggest sticking points that sank the previous talks in 2023 – the EU will open two tariff rate quotas of a total of about 30,600 tonnes, with about 55 per cent of the volume to enter duty-free.

“Australian farmers are extremely disappointed that negotiations for a free trade deal with the EU have concluded without commercially meaningful agricultural market access gains since Australia last walked away from negotiations,” Mr Hamish McIntyre, president of the National Farmers’ Federation in Australia, said in a statement.

Under the agreement to expand defence and security ties, the two sides will expand intelligence-sharing to counter global security threats and deepen cooperation to combat online radicalisation and terror financing.

Australia also agreed to lift the luxury car tax threshold for EU electric vehicles to A$120,000, meaning about 75 per cent of electric vehicles from the region will be exempted from the tax.

Trade between the two sides is substantial, with EU firms exporting to Australia €37 billion of goods in 2025 and €28 billion of services in 2023.

As a bloc, the EU was Australia’s third-largest two-way trading partner in 2024 as well as the sixth-largest export destination, official data showed.

The bloc was Australia’s second-largest source of foreign investment in 2024. REUTERS