Impacts of the One Big Beautiful Bill Act on the U.S. Mining Sector

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On July 4, 2025, President Trump signed into law H.R.1, the One Big Beautiful Bill Act (OBBBA). This comprehensive piece of legislation introduces significant changes to U.S. tax policy, social safety net programs, healthcare, immigration, and border enforcement. One of the key areas impacted by the OBBBA is the critical minerals sector. The new law revises provisions of the Inflation Reduction Act (IRA), rolling back programs that had been driving growth in the energy sector, especially for minerals vital to clean energy and the electric vehicle (EV) industry. Here’s a closer look at how the OBBBA affects critical minerals production and the mining industry.

Key Provisions Affected by the OBBBA

The OBBBA removes or alters several important tax credit programs introduced under the Biden administration to encourage investment in clean energy and critical minerals. These revisions reflect a shift away from prioritizing renewable energy technologies and electric vehicles, a theme of the Trump administration’s approach.

1. Elimination of the Section 30D Clean Vehicle Credit

One of the most significant changes under the OBBBA is the termination of the Section 30D Clean Vehicle Credit. This $7,500 incentive had been designed to stimulate EV purchases in the U.S. by encouraging the use of minerals sourced from the U.S. or countries with which the U.S. has free trade agreements (FTAs). Since electric vehicles (EVs) are the largest consumers of critical minerals, the loss of this credit is expected to slow down both EV adoption and demand for critical minerals.

Without this incentive, automakers may hesitate to enter into long-term agreements for mineral off-take, especially since the demand outlook for EVs is now uncertain. Additionally, as the prices of key minerals like cobalt, nickel, and lithium have dropped significantly in recent years, there’s a growing concern that more projects will look to China for financing and agreements, further strengthening Beijing’s dominance in global mineral markets.

2. Phasing Out Section 45X Production Tax Credit

Another important provision that changes under the OBBBA is the Section 45X Production Tax Credit. This credit was previously set to phase out by 2032 for most industries. However, under the OBBBA, the credit is now set to gradually decline, reducing its value to 75% in 2031, 50% in 2032, and 25% by 2033 before it ends entirely.

This change has direct implications for the critical mineral mining industry. The tax credit, which had been essential for encouraging investment in new mining projects, is now much less attractive, particularly for greenfield projects (newly discovered deposits that require significant investment and development). Instead, the changes may favor brownfield projects—older mines that are closer to production, albeit with lower-quality reserves.

Redefinition of Foreign Entity of Concern (FEOC) Rules

The OBBBA also introduces stricter rules concerning foreign entities, especially those with links to China. Under the new law, entities from countries of concern—like China—will find it harder to access U.S. tax incentives for critical mineral and energy projects.

The law expands the definition of a “Foreign Entity of Concern” (FEOC), introducing two new classifications: Specified Foreign Entities (SFEs) and Foreign-Influenced Entities (FIEs). These classifications aim to limit the influence of Chinese companies in U.S. critical mineral projects. For instance, if a company has ties to Chinese military companies or other entities linked to the Chinese government, it will be barred from receiving certain tax incentives. This move is designed to reduce the role of China in U.S. supply chains and promote domestic security in critical mineral markets.

Appropriations for Critical Mineral Security

In a positive development for the mining sector, the OBBBA allocates $2 billion to the U.S. Department of Defense to expand the U.S. stockpile of critical minerals, which is crucial for national security. This will help ensure that, in the event of conflicts or natural disasters, the U.S. has a secure and reliable source of essential minerals.

Additionally, the OBBBA sets aside $5 billion for the Industrial Base Fund, which aims to strengthen the U.S. critical mineral supply chains. These allocations provide much-needed support on the supply side. However, the bill does not address the demand-side factors that are necessary to drive sustained market demand for these minerals across sectors like defense, semiconductors, and clean energy.

Can the U.S. Stimulate Demand Without IRA Incentives?

With the removal of key IRA incentives, there are growing concerns that U.S. mining companies may face difficulty attracting investment. The OBBBA lacks provisions for significant demand-side measures that would maintain long-term growth in critical mineral demand. The focus has been primarily on supply-side investments, such as the creation of a more secure mineral stockpile and incentives for domestic production. However, for mining projects to be economically viable, the U.S. will need to establish a broader strategy that also stimulates demand across key sectors.

For example, the semiconductor industry relies heavily on critical minerals like gallium and germanium. While past efforts, such as the CHIPS and Science Act, have focused on boosting domestic semiconductor manufacturing, they have not done enough to ensure the availability of the raw materials needed to build the chips. Similarly, the Defense Production Act has offered some supply-side support but does not address broader issues related to demand stimulation for critical minerals.

Expanding U.S. Mineral Incentives to Other Countries

One area where the OBBBA could still make a significant difference is by expanding the list of countries eligible for U.S. mineral production and processing incentives. The current trade agreements limit the impact of incentives like those in the IRA, as many mineral-rich countries are excluded from these agreements.

For instance, many African nations possess vast reserves of minerals essential for clean energy technologies, yet these countries are not eligible for IRA-related incentives. Expanding the pool of eligible nations could help increase the flow of critical minerals to the U.S., reducing reliance on China and enhancing global supply chain security.

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By broadening the scope of international mineral partnerships and introducing new, targeted incentives, the U.S. can strengthen its critical mineral security and ensure a more stable future for its mining sector.

Author Profile

Syed Tahir Abbas Shah

Syed Tahir Abbas is a Master's student at Southwest University, Chongqing, specializing in international relations and sustainable development. His research focuses on U.S.-China diplomacy, global geopolitics, and the role of education in shaping international policies. Syed has contributed to academic discussions on political dynamics, economic growth, and sustainable energy, aiming to offer fresh insights into global affairs.

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