Australia and the European Union have sealed a landmark trade agreement aimed at slashing tariffs, strengthening supply chains and reducing reliance on China for critical minerals.
The deal, finalised on Tuesday after eight years of negotiations, will remove tariffs on over 99% of European goods entering Australia and nearly all Australian critical mineral exports to Europe. Officials say the agreement could significantly boost trade flows and economic cooperation between both sides.
The pact comes against a backdrop of rising global trade tensions, including higher tariffs imposed by the US under the administration of Donald Trump, and growing concern in Western countries over China’s dominance in rare earth and critical mineral supply chains.
European Commission President Ursula von der Leyen emphasised the strategic alignment between both partners, stating, “The EU and Australia may be geographically far apart but we couldn’t be closer in terms of how we see the world.”
She added, “With these dynamic new partnerships on security and defence, as well as trade, we are moving even closer together.”
The agreement is expected to cut about 1 billion euros annually in duties for European companies, with EU exports to Australia projected to rise by up to 33% over the next decade.
Australian Prime Minister Anthony Albanese said the deal would contribute around A$10 billion annually to the national economy, highlighting its importance in stabilising global supply chains through improved access to critical minerals.
“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.”
Alongside trade, both sides also signed agreements to strengthen security and defence cooperation, reflecting Europe’s expanding engagement in the Indo-Pacific region.
Despite the broader gains, the agreement has drawn criticism from Australian farmers, particularly over limited access to European agricultural markets. Key exports such as beef and sheep meat will face quotas, a longstanding sticking point in negotiations.
“Australian farmers are extremely disappointed that negotiations for a free trade deal with the European Union (EU) have concluded without commercially meaningful agricultural market access gains since Australia last walked away from negotiations,” Hamish McIntyre, president of the National Farmers Federation in Australia, said in a statement.
Under the deal, Australian tariffs on European goods such as wine, sparkling wine, fruits, vegetables and chocolates will drop to zero immediately, while tariffs on cheeses will be phased out over three years.
The EU, meanwhile, will allow limited tariff-free access for some agricultural products, including beef quotas totalling 30,600 metric tons, with about 55% entering duty-free.
The agreement also includes provisions protecting European geographical indication labels for products like Pecorino Romano and Ouzo, while allowing some continued use of names such as feta under strict origin labelling rules.
In a move expected to benefit European manufacturers, Australia will raise the luxury car tax threshold for EU electric vehicles to A$120,000, exempting about 75% of such vehicles from the tax.
Trade between both sides remains substantial, with EU firms exporting goods worth 37 billion euros to Australia in 2025 and services valued at 28 billion euros in 2023. The bloc ranks as Australia’s third largest trading partner and second largest source of foreign investment.
Faridah Abdulkadiri
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