Impacts of the One Big Beautiful Act on the Mining Sector

Critical Questions by Gracelin Baskaran and Meredith Schwartz

Published July 9, 2025

On July 4, 2025, President Trump signed H.R.1, the One Big Beautiful Bill Act (OBBBA), into law. The sweeping legislation enacts major changes across tax and fiscal policy, social safety-net and healthcare programs, and immigration and border enforcement. Notably, it includes substantial revisions to the Inflation Reduction Act (IRA), rolling back several programs with lasting implications for the energy sector and critical mineral supply chains. While the bill aims to accelerate domestic sourcing of critical minerals and reduce U.S. dependence on China, it simultaneously eliminates key IRA incentives that have been driving downstream demand-introducing new complexities for making long-term minerals investments and reshaping critical mineral supply chains long dominated by Beijing.

Q1: Which critical minerals-related IRA provisions are affected by the OBBBA, and what does this mean for critical mineral producers?

A1: The OBBBA targets several IRA-era tax credit programs introduced under the Biden administration to encourage investment in U.S.-based clean energy supply chains and the critical minerals essential to domestic manufacturing. These revisions reflect the Trump administration's broader shift away from prioritizing the energy transition and the expansion of renewable technologies and electric mobility.

• Eliminates Section 30D Clean Vehicle Credit
  
  The OBBBA terminates the Section 30D Clean Vehicle Credit at the end of the current fiscal year. This $7,500 incentive was intended to drive investment in the United States and countries it has a free trade agreement (FTA) by incentivizing the purchase of electric vehicles (EVs) that rely on minerals sourced from these jurisdictions. Given that EVs are the largest commercial driver of critical mineral demand, the credit's removal is likely to dampen both large-scale mineral demand and broader EV adoption.
  
  Without this policy support and facing an uncertain demand outlook, automakers are less inclined to enter into long-term mineral offtake agreements-making it more difficult for domestic mining projects to attract investment. These headwinds are amplified by the current price environment: Between 2022 and 2025, cobalt prices dropped 60 percent, nickel by 73 percent, and lithium by 87 percent. In the absence of stable domestic demand, more projects may turn to China for financing and offtake. In 2024, Chinese mining acquisitions abroad surged to their highest levels in over a decade-part of a broader push to secure control over the materials that power the global economy amid rising geopolitical tensions.
  
• Phases Out the Section 45X Tax Credit by 2033
  
  The OBBBA introduces major revisions to the Section 45X Production Tax Credit for critical mineral components. As outlined in CSIS Critical Minerals Security Program's November 2024 analysis, this credit offered a 10 percent incentive to taxpayers for costs associated with producing critical minerals to specified purity thresholds-including both extraction and materials processing expenses. Designed to boost domestic production of inputs essential to clean energy technologies, the credit was originally set to phase out by 2032 for most industries-except critical minerals, which were exempted to reflect the long timelines and capital challenges typical of mining projects. This indefinite extension was particularly important given the sector's struggle to attract private investment amid falling commodity prices, prolonged permitting processes, and fierce competition from heavily subsidized Chinese producers.
  
  The OBBBA eliminated this phaseout exemption for critical mineral components and imposes a phasedown with the credit dropping to 75 percent in 2031, 50 percent in 2032, and 25 percent in 2033 before ending on December 31, 2033. Now, only critical mineral projects that are operational before 2032 will access the full credit for a short number of years. Given the long timelines for developing new mines and ramping up production, the revisions to Section 45X will dampen the credit's impact on the mining sector. Furthermore, the amended tax credit disincentivizes investment in newly discovered greenfield projects with longer timelines to production in favor of brownfield legacy mines that may be closer to production but have lower grade reserves.
  

Q2: How are Foreign Entity of Concern (FEOC) rules redefined, and how will critical mineral projects be impacted?

A2: The OBBBA adopts a more stringent definition of FEOC, expanding the range of companies and actors that are disqualified from receiving benefits. These updated provisions are specifically designed to limit Chinese firms' access to U.S. tax incentives by narrowing eligibility criteria and discouraging Chinese investment in U.S. critical mineral and energy projects.

The OBBBA establishes two new classifications of FEOCs. The first, Specified Foreign Entities (SFEs), seeks to unify previously fragmented definitions used across federal agencies into a single, comprehensive category. SFEs encompass Chinese military companies, battery manufacturers banned from Department of Defense contracts, entities listed by the Department of Commerce's Bureau of Industry and Security, companies on the Uyghur Forced Labor Prevention Act Entity List, and those identified in the William M. Thornberry National Defense Authorization Act 2021 FEOC list. The second classification, Foreign-Influenced Entities (FIEs), casts a wider net-covering any company significantly influenced through formal relationships or financial dependence on an SFE. A company qualifies as an FIE if an SFE appoints its executives or board members, holds a 25 percent or greater ownership stake, or has contractual rights to control production. Together, SFEs and FIEs form a broader category referred to in the legislation as Prohibited Foreign Entities (PFEs). PFEs are barred from accessing 45X production tax credits beginning in 2026.

Another FEOC change is related to Section 45X(c)(6). This provision outline 50 minerals-such as aluminum, cobalt, lithium, and nickel-that qualify as applicable critical minerals under the tax credit, provided they are processed or refined to specified purity levels. Under the OBBBA, the determination of whether a facility or energy storage technology benefits from "material assistance from a prohibited foreign entity" is based on a new metric: the material assistance cost ratio. This ratio compares the total cost of all manufactured products used in the completed project-excluding those sourced from a PFE-against the total cost of all manufactured products incorporated into the project. A facility complies only if this ratio meets or exceeds the required threshold percentage.

The OBBBA also takes a mineral-by-mineral approach. It mandates that by December 31, 2027, the secretary of the treasury should establish updated threshold percentages for each of the critical minerals listed in Section 45X(c). These new benchmarks will (a) replace the prior thresholds for each calendar year going forward and (b) must be equal to or higher than the earlier thresholds, taking into account how available the mineral is in the United States, current supply chain challenges, U.S. processing capacity, and national security considerations.

Q3: Will new appropriations meaningfully increase critical mineral security?

A3: Section 20004 of the OBBBA includes the following allocations for fiscal year 2025: $2 billion to the secretary of defense to boost the U.S. stockpile of critical minerals through the National Defense Stockpile Transaction Fund. The stockpile is a critical national security support mechanism. In the event of a natural disaster, regional conflict, or major war, government-owned mineral stockpiles can supply the U.S. military and critical industries with the materials necessary to support national defense. The OBBBA provides an additional $5 billion-available through September 30, 2029-for investments in critical mineral supply chains via the Industrial Base Fund under Title 10, U.S. Code.

While these allocations represent meaningful supply-side support, the OBBBA does not deliver on demand-side measures needed to drive sustained market demand from key sectors, defense, semiconductors, and energy.

Q4: Can downstream demand for critical minerals be stimulated without IRA clean energy incentives?

A4: Possibly-but it will require a new and sustained demand signal. The United States must establish a broad, cross-sector incentives strategy that promotes sustained demand for critical mineral production and processing for off-take in defense, semiconductors, automotive, and energy. While past efforts, such as the CHIPS and Science Act, have bolstered domestic semiconductor manufacturing, they failed to include any provisions to source upstream mineral inputs essential to chip fabrication. Similarly, the IRA introduced valuable incentives for critical mineral production, but its benefits were limited to projects within the United States or countries with which it has FTAs. This narrow scope excluded many mineral-rich nations, limiting both the number of vehicles eligible for the tax credit and the total policy impact. The Defense Production Act is also a supply-side intervention.

Today, U.S.-based mineral projects face mounting challenges: falling commodity prices, high operating costs, and aggressive competition from Chinese firms. Chinese producers often benefit from low-cost labor and energy, deep state subsidies, and government-backed market interventions. As a result, many Western projects are no longer economically viable and are operating at a loss-deterring private investment not only in the United States but also in partner countries.

Strategic incentives can help reverse this trend. By offering production tax credits and subsidies, these incentives reduce investment risk and improve the competitiveness of Western mining and processing ventures. To ensure long-term supply chain security, these packages must go beyond EV battery minerals to include those critical to advanced technologies, such as gallium and germanium for semiconductors. Targeted tax credits for midstream mineral processing-both domestically and in key allied nations-will be essential to getting these complex, capital-intensive projects off the ground.

Q5: Which countries should be eligible for future U.S. mineral incentives?

A5: There is a need to widen the list of eligible countries for minerals production and processing incentives. Critical mineral reserves do not align neatly with the boundaries of U.S. FTAs, which limited the effectiveness of the IRA's sourcing requirements. For instance, Morocco-the only African nation with a U.S. FTA-has minimal mineral reserves, while much of the rest of the continent holds vast deposits of copper, cobalt, lithium, nickel, graphite, rare earth elements, platinum group metals, manganese, and chrome. Yet, these resource-rich countries were excluded from IRA benefits. This disconnect between where minerals are located and where U.S. trade agreements exist meant that North American automakers faced significant challenges in sourcing eligible minerals-ultimately resulting in only a small number of EV models qualifying for the credit and undermining the overall impact of the policy.

Expanding the pool of eligible countries for mineral-related incentives represents a strategic lever for strengthening U.S. minerals diplomacy and advancing long-term supply chain security. By broadening eligibility beyond the narrow confines of existing FTAs, the United States can create meaningful incentives for resource-rich nations to align their critical minerals exports with U.S. and allied markets, rather than defaulting to Chinese offtake arrangements.

Gracelin Baskaran is director of the Critical Minerals Security Program at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Meredith Schwartz is a research associate for the Critical Minerals Security Program at CSIS.

Programs & Projects

Critical Questions by Gracelin Baskaran and Meredith Schwartz - November 6, 2024

Report by Gracelin Baskaran and Duncan Wood - February 10, 2025

Commentary by Gracelin Baskaran - June 12, 2025