Tariffs place US-Brazil rare earth deal on shaky ground

Tensions between President Trump and Brazil’s leader could derail a promising alliance to unlock the world’s second largest reserve of the minerals

Tucked under layers of clay and rock, Brazil has a bounty that much of the world covets: millions of tons of rare earth minerals needed to build drones and robots, electric cars and guided missiles.

For years Brazil and the United States have quietly discussed how American investment and assistance could help the South American country unlock these vast reserves of rare earths, the world’s second largest.

But now, the diplomatic crisis between the Western Hemisphere’s two largest nations risks derailing years of US efforts to secure access to Brazilian rare earths.

By loosening China’s grip on strategic minerals crucial to the economies and battlefields of the future, both nations stood to gain from such an alliance, according to current Brazilian and former US officials.

American support could help Brazil become a global powerhouse in the extraction and processing of rare earths. And Brazilian rare earths could reduce American dependence on China, which controls about 90% of world supplies — and has shown itself willing to withhold them.

The talks about this alliance, which have not been previously reported, were at an early stage. Then, Brazil’s rare earths were suddenly thrust into the bitter trade dispute between the two countries that erupted last month.

Ties between the Brazil and the United States frayed when President Donald Trump targeted the country with 50% tariffs to help his political ally, Jair Bolsonaro, the former Brazilian president, who is facing criminal charges for plotting a coup.

Just before tariffs were imposed on Brazil, the United States signalled that access to Brazil’s strategic minerals should be part of trade talks. President Luiz Inácio Lula da Silva snapped back, accusing the United States of threatening his nation’s sovereignty.

“No one lays a hand,” Lula said last month, referring to Brazil’s critical minerals. “This country belongs to the Brazilian people.” Brazilian officials also made clear that they will now seek to explore tapping its rare earth deposits with other allies, like India. “With Brazil, we were pushing an open door,” said José Fernandez, a former top official at the State Department. “I don’t know if this will backfire, but it certainly will not help.”

Brazil is believed to hold between 19% and 23% of global reserves of rare earths, a group of 17 elements needed to make powerful magnets used in a range of products, from electric cars and wind turbines to missiles and fighter jets.

For decades, China, home to 40% of rare earth deposits, has dominated global supply chains of the minerals, which are plentiful in the earth’s crust but difficult to extract and separate. The West has mostly left to China the hard work of mining, processing and refining rare earths into magnets imported by the United States and other countries. For some rare earths, China is virtually the only country able to separate and process them.

But other countries have grown wary of China’s chokehold. Beijing cut off supplies to Japan in 2010 and is now withholding some critical minerals and magnets from the United States in response to tariffs. To reduce its reliance on China, the Pentagon has poured millions into a Las Vegas-based mining company, MP Materials, becoming its largest shareholder.

Brazil has emerged as perhaps the most promising challenger to China’s monopoly. It has reserves of about 21 million tons, though it may be years away from producing significant amounts of the minerals.

“There is still a lot to be explored, to be studied,” said Inácio Melo, director-president of the Brazilian Geological Survey. “Brazil has enormous potential.”

For now, just one Brazilian mine, partially backed by American investors, is churning out small quantities of minerals, which still have to be shipped to China for processing. But Brazil has ambitious plans to build a domestic supply chain spanning mines, processing plants and magnet factories. Until recently, the US had been helping Brazil inch closer to its goals. Biden administration officials made at least five visits to the country from 2022 to 2024, according to Fernandez, who participated in some of the meetings.

Brazil’s main focus in these discussions was securing technical assistance and American investment, Fernandez said. “Brazil was a very willing partner,” he added.

During a State Department visit last year, US officials appeared interested in Brazil’s first laboratory where rare earths will be made into magnets and its capacity to eventually supply the Pentagon, according to Eduardo Neves, a researcher at the facility who participated in the meeting.

“They wanted information from us about whether we are already selling magnets, how long it will take to produce,” he said. “They seemed very interested.”

Last year, American and British investors poured $150 million into Brazil’s first rare earths mine, Serra Verde, as part of an initiative backed by the US government.

In the months after Trump took office, the top U.S. diplomat in Brazil, chargé d’affaires Gabriel Escobar, met with Brazil’s mining association to discuss a possible partnership on rare earth minerals, according to Raul Jungmann, the group’s president. Then, in July, two weeks after Trump threatening Brazil with high tariffs, Escobar requested another meeting, according to Jungmann.

“The first time, he was more concerned with partnerships,” Jungmann said. The second time, the tone was more insistent, he added. “He made the United States’ interest in strategic critical minerals very clear, very explicit.”

In Brazil, a country sensitive to foreign involvement in its resources, after decades of booms and busts in commodities like rubber and sugar, US interest in rare earths made headlines and triggered anger and suspicion. Then, after the tariffs took effect and negotiations over a trade deal hit a stalemate, some Brazilian officials struck a more conciliatory tone, signalling they were open to putting rare earths on the negotiating table.

Trade talks between Brazil and the United States have since stalled, with Brazil accusing Trump of ignoring its attempts to negotiate and Trump insisting the country drop its case against Bolsonaro, which many in Brazil see as central to safeguarding the nation’s democracy.

Last week, tensions escalated when Trump accused Brazil of being a “horrible trading partner.” Lula shot back, pointing out that his nation runs a trade deficit with the United States. “We’re still willing to negotiate, but Brazil won’t kneel before the United States.”

Brazil now appears to be forging ahead largely without the United States. It is studying its deposits with the help of a Spanish mapping firm and working toward improving its processing abilities through a public-private partnership backed by more than two dozen companies and research groups from around the world.

“Establishing a supply chain outside of China is quite important for most Western nations right now,” said John Prineas, executive chair of Australia-based St. George Mining, which is developing a rare earths project in Brazil’s Araxá region. “Brazil has a potentially big role to play there. And we’re happy to be a part of it.”

The tariffs on Brazil were softened by hundreds of exceptions, but rare earths were notably absent from the list.

That would make American firms reluctant to invest in the country’s rare earths, according to Sergio Fontanez, a former government adviser and chair of the U.S. Export-Import Bank, a government export credit agency. “There’s an opportunity there for us,” Fontanez said. “But what you’re essentially creating now,” he added, “is an embargo for US companies.”