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Donald Trump’s flagship spending plan will cut back on support for US production of critical minerals despite efforts to intensify competition with China and reuse industries essential to consumers and defense technology.
The law removes a 10% tax credit on the production costs of companies extract, improve and recycle important minerals such as lithium, nickel, cobalt and magnesium, and punishes businesses using foreign-made parts. Estimates by the Congressional Joint Tax Commission said the credit would cut government revenue by $72.7 billion between 2023 and 2027.
Industry executives said the move undermines efforts to build key US mineral companies.
“It’s challenging to compete for capital to raise funds without state support. China knows that. It’s like Industrialization 101,” said Alex Grant, CEO of Magletea, Magnesium Company. Withdrawal of credits “is completely backwards and indicates a lack of a deep understanding of how the industry works.”
10% production relief was a component of Biden-era inflation reduction laws. Unlike other clean technology incentives in that bill, the critical mineral tax credit was considered permanent to illustrate the importance of building semiconductors, drones and electric vehicles.
Currently, access to credits will be abolished from 2031 and removed by 2034.
“It’s very cost-controlling to do these projects here,” said Abigail Hunter, executive director of the Critical Mineral Strategy Center at Safe, an advocacy group. “They need expertise, time, infrastructure, equipment. We’re not turnkey now,” she said.
Tax credits for electric vehicles that use materials such as lithium will also be reduced by 2026.
The bill was sent back to a house where it could change for another vote before reaching Trump’s desk.
Congressional cuts on key minerals underscore the tensions in the Trump administration’s strategic goals. During his reelection campaign, Trump vowed to “end” the Green Energy incentives, and 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 that China’s control is “suddenly threatening” the country’s security. There are promptly permissions for 28 projects, including Tonopah Flats, a Nevada lithium mining project.
“I think the administration is thinking of a strategy that has so far focused on permits,” said Milo McBride, Carnegie Endowment Fellow for International Peace Sustainability, Climate and Geopolitics Program. “But that’s not a consistent continuation from the existing policy framework.”
Some grants and loans are available from the government, but some companies say that it’s not enough. The company owners also say the move will hinder their ability to raise funds and raise services’ debt.
Venture capital investments in critical mineral, rare earth and lithium battery companies rose 180% to $597.1 million from 2022 to 2025, according to data company Pitchbook.
“The question now is whether the project will bring enough profits to make investors feel comfortable,” said Sham Decigan, vice president of finance at Greenlee-ion, lithium-ion battery recycling company.
“We secured our debt and investments based on a financial model that relied on this tax clause,” said Kaleigh Long, CEO of Westwin Elements, a nickel refinery company.
But without removing the tax credit, analysts say efforts to increase the future of the US minerals are already facing difficulties.
Nickel prices have fallen 46% over the past three years – in part because they have risen significantly from China-owned mines – while lithium prices have collapsed 90% over the same time frame.
“The prices were high two years ago,” said Willis Thomas, head of consulting at product analyst CRU. “As post-Covid bumps move out of the system, people realize that there are no longer any projects that could be feasible.”
