As the Trump administration has moved to confront China’s unfair trade practices, Beijing has zeroed in on a crippling U.S. vulnerability—our alarming reliance on mineral imports. In response to tariffs, China is using its vise-like grip on mineral supply chains to exert extraordinary leverage.
Over the past few months, China has systematically restricted or altogether cut off supply of critical minerals from gallium used in semiconductors to antimony and tungsten used in munitions and, most recently, rare earth elements so essential to our tech and defense industries.
Confronting China’s mineral extortion is a national crisis. What we have in abundance is mineral resources. What we have missed is the strategic mineral policy that ensures we turn those resources into secure, domestic supply chains.
If we are to break China’s hold on global mineral supplies, we need to increase the competitiveness of the U.S. mining industry, reducing barriers to production and strengthening incentives that can make an immediate impact. Section 45X of the Internal Revenue Code is a case in point.
Enacted as part of the 2022 Inflation Reduction Act (IRA), Section 45X was supposed to incentivize mineral production from the mine through the assembly line but its implementation has left much to be desired. While intended to cover domestic miners as well as processors, under current implementation it only allows mining companies to claim the credit if they both mine materials and process them, cutting out a significant portion of the U.S. mining industry.
Exacerbating this situation, the final regulations make the tax credit available to foreign-mined minerals (including those mined in China and Russia) processed in the United States. Instead of leveling the playing field, American producers find themselves competing with market manipulation tactics and cheap foreign minerals produced under questionable environmental, labor, and safety standards.
As currently written and implemented, the 45X credit fails its core mission. It hands taxpayer-funded subsidies to refiners who import minerals from countries like China and Russia while denying access to U.S.-based mining operations that extract critical minerals on American soil. A domestic miner without in-house refining capacity is shut out, while a company importing ore from a Chinese state-controlled entity can collect U.S. tax credits.
American producers are effectively punished, leaving our supply chains exposed where they are most fragile, at the point of origin.
Now is the moment to fix 45X and return it to its original intent—to strength American mining. While there is much of the IRA that needs to be scrapped, 45X – if reshaped – can be a cornerstone of reshoring U.S. manufacturing and rebuilding domestic production of materials essential to our energy, defense and technology sectors.
President Trump has already demonstrated his commitment to this goal with both his January 20 Executive Order, Unleashing American Energy and his March 20 Executive Order, Immediate Measures to Increase American Mineral Production. Rebuilding American mining and taking on China’s mineral extortion is a crisis that requires every tool at our disposal.
Congress should act to ensure the 45X credit supports American production at every level of the supply chain. That means closing loopholes that reward foreign sourcing and expanding eligibility to include domestic mining operations regardless of refining status. Congress should also give the Treasury the flexibility to update the list of covered minerals based on evolving national and economic security needs.
Lawmakers have an opportunity to correct a flawed incentive, strengthen U.S. competitiveness, take on China and keep American tax policy focused where it belongs—on supporting domestic investment, jobs and our national security.
Jeff Ryer is the Executive Director of CASE, Consumer Action for a Strong Economy, a free-market oriented consumer advocacy organization.
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