Trump’s Tax Cut Bill Threatens US Critical Minerals Industry and Competition with China

Trump’s tax-cut bill could hinder US critical minerals projects
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US President Donald Trump’s tax and spending bill poses a challenge for American critical minerals companies, as it removes a tax credit designed to promote domestic production of essential materials like nickel and rare earths, which are vital for advanced electronics and weaponry. The House of Representatives recently passed a version of Trump’s “One Big Beautiful Bill Act,” which eliminates the 45X credit aimed at supporting these industries. The Senate is currently deliberating the bill.

In contrast, former President Joe Biden’s 2022 climate legislation, the Inflation Reduction Act, introduced a 10% production credit that lowers corporate taxes for critical minerals extraction and processing, including incentives for solar, battery, and wind projects. The House bill treats government incentives for wind turbines similarly to those for mining projects, which many consider crucial for national security.

Critical minerals companies argue that their projects are collateral damage in the ongoing political dispute over renewable energy. The tax credit is currently part of the federal budget, and the nonpartisan Congressional Budget Office has yet to assess the potential savings from its removal. The Republican majority in Congress is looking for funding to support other initiatives, such as tax cuts, defense spending, and budget balancing.

This month, the House Freedom Caucus stated that it “will not accept” any attempts to dilute or eliminate the hard-fought spending reductions and rollbacks of the Inflation Reduction Act included in this legislation. Miners contend that they require the tax credit to remain competitive against Chinese companies, which have disrupted global markets by flooding them with inexpensive supplies of nickel, cobalt, and lithium.

The traditionally conservative mining sector now finds itself in a position where it needs federal backing to grow, and in some cases, to survive. The owner of the only US cobalt mine filed for bankruptcy this year due to depressed global prices driven by Chinese competition. “Without that tax credit, critical minerals producers in the US risk facing closures,” stated KaLeigh Long, founder and CEO of Westwin Elements, which is developing the nation’s sole commercial nickel refinery. Long emphasized that the company’s financial model was predicated on the expectation that the tax credit would be permanent.

Last month, Long submitted a letter to the Senate advocating for the preservation of the credit, which was co-signed by 30 industry executives. Any modifications made by the Senate to the bill will need to be reconciled with the House version before being sent to Trump. Some House members have admitted they did not read the entire bill prior to voting, including Congresswoman Marjorie Taylor Greene and Congressman Mike Flood.

The House version does allocate $2.5 billion for a critical minerals stockpile and $500 million for a Pentagon mining loan program; however, these amounts are often insufficient for large mining operations. House Democrats unanimously opposed the bill, arguing that the proposed tax cuts would exacerbate the deficit while necessitating cuts to healthcare, food assistance, education, scientific research, and other programs.

“There are many pressing issues currently under review in Congress, and this one hasn’t gained much traction yet, but it will certainly become significant when we face a mineral shortage in five years,” remarked Jeff Green, a critical minerals industry consultant. Senator John Hickenlooper, a Colorado Democrat who supported the Inflation Reduction Act, stated that eliminating the credit would “kill jobs… just to fund tax breaks for the ultra-wealthy,” marking it as a “bad deal” for the nation.

Trump has issued several executive orders aimed at enhancing US minerals production, but he has not publicly addressed the debate surrounding the 45X credit. A White House official indicated that the administration would only support provisions from the Inflation Reduction Act, like the 45X tax credit, if they align with the president’s priorities.

“The tax credit significantly enhances a project’s economic viability and provides us with advantages that China already offers its companies,” said Alex Grant, CEO of magnesium processing startup Magrathea, who also signed the letter advocating for the credit. China dominates global production of magnesium, a key component in steel and aluminum alloys. Abigail Hunter, executive director of SAFE’s Center for Critical Minerals Strategy, labeled the tax credit as the “only tool currently available to support industries facing market manipulation.”

Additionally, the House bill removes any remaining funding from the Inflation Reduction Act for the US Department of Energy’s Loan Programs Office (LPO), which awarded billions of dollars in loans to lithium projects in Nevada under Biden’s administration. Concerns about the potential closure of the LPO prompted miners to hastily finalize loans last year.

Republican senators have recently engaged in discussions to extend certain green energy tax credits, particularly for businesses making significant capital investments, although no firm commitments have been established. For Mahesh Konduru, CEO of minerals processing startup Momentum Technologies, preserving the tax credit represents a vital means for Washington to demonstrate its support for the industry. “We need the right tools to build, nurture, and expand that supply chain within the United States,” he stated.