TL/DR –
The Trump administration issued a 25% tariff on steel imports due to national security threats and also granted a 2.5% production tax credit for metallurgical coal, an input for the steelmaking process, as part of the One Big Beautiful Bill Act. However, as the U.S. is a net-exporter of metallurgical coal, the tax credit effectively subsidizes foreign steel producers, like China, without significantly benefiting U.S. supply chains. The article argues that the funds for metallurgical coal production tax credits could provide more strategic value if applied to any official critical mineral with promising domestic reserves, in particular those dominated by China in global production.
Trump administration’s perplexing approach to metallurgical coal and critical minerals
Earlier this year, the Trump administration imposed a 25% tariff on steel, citing national security concerns and Chinese overproduction. Shortly afterwards, the One Big Beautiful Bill Act provided a 2.5% production tax credit for metallurgical coal, a material used in steel production. The Department of Energy advocated for this support, expecting a surge in demand due to increased domestic steel production. However, since the U.S. is a net exporter of this type of coal, the tax credit inadvertently supports foreign steel manufacturers, including China, which purchases a sixth of U.S. metallurgical coal exports.
Mixed signals on trade strategy
The steel tariffs and metallurgical coal tax credit are part of a broader pattern of tariffs on crucial materials such as copper, aluminum, and graphite, aimed at countering Chinese dumping practices. Simultaneously, the One Big Beautiful Bill Act phased out the 45X Advanced Manufacturing Production Credit for critical minerals. This decision weakened U.S.’s ability to fortify its most vulnerable mineral supply chains, many of which are primarily controlled by China.
The Trump administration’s actions indicate a haphazard attempt to address the risks posed by China to U.S. supply chains. By abandoning critical mineral tax credits, the U.S. is straying from a well-informed strategy that considers risk factors like single points of failure or net import reliance. The arbitrary approach risks squandering federal resources on commodities that are not critical. The tax credit for metallurgical coal, which primarily benefits foreign steel producers, exemplifies this haphazard approach. A more efficient use of federal resources would be to apply the tax credits to critical minerals, which would significantly bolster U.S. defenses against disruptive Chinese trade practices.
Understanding metallurgical coal
Metallurgical coal, used in steel and other metal alloy production (specifically for steel manufacturing in the case of this tax credit), is different from thermal coal, which is used to generate electricity. Some types of metallurgical coal are suitable for producing coke, which is used in blast furnaces to produce pig iron, a precursor to steel. This method accounted for 28% of U.S. steel production in 2024. The remaining 72% of steel production was from electric arc furnaces, which use anthracite coal to control the carbon content of steel.
In 2023, the U.S. produced around 66 million tons of coking coal from 163 different mines, and exported around 75% of this. This makes the U.S. the second largest exporter of coking coal in the world, contributing to 14% of the global export market. The U.S. has been a net exporter of coking coal since 1980. The proportion of production exported by U.S. firms has gradually increased, probably due to the decreased use of blast furnaces for steel production in the U.S.
In contrast, the U.S. produced about 3 million tons of anthracite from 41 mines in 2023, exporting around 25% of this. Despite the steady adoption of electric arc furnaces in the U.S. steel fleet, the U.S. has maintained a net exporter status of anthracite for all but seven years since 1980. This makes the U.S. the US Economic News