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Donald Trump’s flagship spending plan cuts support for US production of critical minerals, despite intensifying competition with China and efforts to reshore an industry essential to consumer and defence technology.
The legislation will remove a 10 per cent tax credit on the production costs of companies that extract, refine and recycle critical minerals — such as lithium, nickel, cobalt and magnesium — and penalise companies for using parts made by foreign countries. Estimates by Congress’s Joint Committee on Taxation said the credit would reduce government revenue by $72.7bn between 2023 and 2027.
Industry executives said the move would damage efforts to build out US critical minerals companies, many of which are still nascent.
“Wrangling the capital to finance projects is challenging without state support. China knows that. It’s just like Industrialisation 101,” said Alex Grant, chief executive of Magrathea, a magnesium company. Withdrawing the credit “is completely backwards and demonstrates a profound lack of understanding of how industry works”.
The 10 per cent production relief was a component of the Biden-era Inflation Reduction Act. Unlike other incentives for clean technologies in that bill, tax credits for critical minerals were supposed to be permanent, to account for their importance in making semiconductors, drones and electric vehicles — as well as their lengthy start-up processes.
Now, access to credits will be wound down, starting in 2031 and eliminated by 2034.
“It’s very cost inhibitive to do these projects here,” said Abigail Hunter, executive director of Safe’s Center for Critical Minerals Strategy, an advocacy group. “They need expertise, time, infrastructure and equipment — we’re not turnkey right now,” she said.
Tax credits for electric vehicles, which use materials such as lithium, will also be cut by 2026.
The bill has been sent back to the House, where it could change, for another round of voting before reaching Trump’s desk.
Congress’s cuts to critical minerals highlight a tension in the Trump administration’s strategic objectives. During his re-election campaign, Trump vowed to “terminate” green energy incentives, while his energy secretary Chris Wright called them a “big mistake”.
At the same time, the White House stressed the need to boost US production of critical minerals, saying the country’s security is “acutely threatened” by Chinese dominance in a March executive order. It has fast-tracked permits for 28 projects, including Tonopah Flats, a lithium mining project in Nevada.
“I think the administration is figuring out a strategy, one that thus far focuses more on permitting,” said Milo McBride, a fellow in the Carnegie Endowment for International Peace’s sustainability, climate, and geopolitics programme. “But it is not a coherent continuation from the existing policy frameworks.”
While some grants and loans are available from the government, some companies say that will not be enough. Company owners also say the move will hinder their ability to raise money and service debt.
Venture capital investment in critical mineral, rare earth and lithium battery companies jumped 180 per cent to $597.1mn from 2022 to 2025, according to data firm PitchBook.
“Now the question is, is the project making enough returns for investors to be comfortable?” said Shyam Desigan, senior vice-president of finance for Green Li-ion, a lithium-ion battery recycling company.
“We’ve secured debt and investment based on financial models that were relying on this tax provision,” said KaLeigh Long, chief executive of Westwin Elements, a nickel refinery company.
However, even without removal of the tax credit, analysts say efforts to boost prospects for US critical minerals were already facing difficulties.
The price of nickel has fallen 46 per cent over the past three years — partially because of huge supply increases from Chinese-owned mines — while the price of lithium collapsed by 90 per cent over the same timeframe.
“Two years ago prices were high,” said Willis Thomas, head of the consulting arm of the commodities analyst CRU. “As the post-Covid bump moved out of the system, people are recognising that projects that may have been viable are no longer.”
