Changing U.S. Critical Minerals Policy and What It Means for Indonesia

U.S. critical minerals policy is entering a new phase under President Donald Trump’s administration—one defined by an unapologetically “America first” agenda. The administration is centering domestic production and prioritizing American miners and processors whenever possible. While it is unclear what this shift means for existing multilateral partnerships, security-driven conversations are creating opportunities for new critical minerals agreements. Unlike the Biden administration’s approach, in which building resilient supply chains for the clean energy transition laid the groundwork for international engagement, the Trump administration appears to prefer bilateral deals or small, security-focused arrangements that make it easier to safeguard U.S. interests.

For Indonesia, this shift introduces both new opportunities and sharper challenges. Indonesia will need a way to position itself as an indispensable partner in a U.S. policy landscape that increasingly prioritizes national security and domestic production. At the same time, U.S. companies looking to advance projects in Indonesia—or source Indonesian materials—will need to navigate a U.S. policy environment that prizes domestic producers and frames international partnerships as means to strengthen national prosperity and security.

Shifting Domestic Policies: From Energy Transition to U.S. Energy Dominance

The pivot in U.S. domestic and foreign policy is most clearly visible in the slew of executive orders that so far define the current administration’s minerals posture. Executive orders such as “Unleashing American Energy” and “Immediate Measures to Increase American Mineral Production” mark a rhetorical break from the previous administration’s emphasis on global supply chain cooperation to build the mineral base needed for the energy transition. They emphasize extraction, processing, and above all, domestic production. The “America First Foreign Policy Directive to the Secretary of State” reinforces that shift by championing a less collaborative and more transactional mode of international partnerships. At its core, the Trump administration’s policy decisions—including critical mineral policy—are measured by their immediate benefit to the United States and U.S. interests, with less flexibility for the mutual compromises required by international cooperation.

Congress is reinforcing these changes by redirecting available funding for critical minerals away from clean energy–focused programs toward national security–focused ones highlighted in the executive orders. The One Big Beautiful Bill Act retracts the unobligated funding of key programs in the Department of Energy Loan Programs Office—including those with the largest remaining funds available for critical minerals—and in section 50403 replaces them with a smaller energy dominance financing program focused mainly on brownfield opportunities. The reconciliation bill in section 70501 also eliminates the section 30D clean tax credit, which, with its sourcing provision, was widely regarded as the only meaningful demand driver for critical minerals used in lithium-ion batteries. New and stricter prohibited foreign entity (PFE) restrictions are introduced in sections 70512–14 for the remaining tax credits, such as the 45X advanced manufacturing production credit, aimed squarely at restricting sourcing from and commercial arrangements with foreign operations effectively controlled by Chinese entities. At the same time, the One Big Beautiful Bill Act creates new pots of money for critical minerals under the Department of Defense, appropriating $7.5 billion to bolster supply chains—including $2 billion for stockpiling and $5 billion for the Industrial Base Fund, earmarked specifically for critical minerals (see section 20004). Additionally, $500 million of the $1.5 billion appropriated to the Office of Strategic Capital is designated for critical minerals.

These shifts in U.S. policy are creating uncertainties for foreign partners such as Indonesia. The early sunset of Section 30D electric vehicle sourcing rules, formerly a cornerstone of Washington’s conversations about minerals with Jakarta, eliminates the main motivation that drove both sides to the table. Stricter PFE provisions for remaining tax credits now hang over Indonesia. Given the dominant role of Chinese FDI in Indonesia’s critical minerals sector, producers have no choice but to wait for U.S. Treasury guidance to see whether their operations will be considered PFEs. The stakes are especially high for nickel producers that want to supply U.S. battery makers. Finally, it is unclear how the energy dominance agenda and its impact on growth of U.S. demand for electric vehicles will impact U.S. demand for nickel, and in extension, the attractiveness of the United States as a partner for Indonesian producers.

Unanswered questions also remain on the U.S. side, particularly regarding how the Trump administration will view future investments in the critical minerals sector in Indonesia and what implications favoring domestic priorities may have for existing and future U.S. producers. Just as important is how growing attention to unconventional sources, such as deep-sea nodules, will impact the importance of Indonesia as a strategic partner. That said, the larger market volumes and high projected demand for commodities such as nickel and copper make investment decisions in these metals less binary compared to decisions for smaller-market minerals, leaving room for projects to advance in both the United States and Indonesia.

Security Shapes Partnerships

The overarching logic guiding the Trump administration’s choice of strategic partners for critical minerals agreements and other partnerships has not solidified. The only consistent through-line so far is that emerging initiatives are anchored in security dialogues rather than purely economic or market-based logic, though these efforts have also evolved under the administration.

This logic is evident in the critical minerals agreements already announced or under development. The U.S.-Ukraine minerals partnership doubles as a vehicle to justify future financial support for Kyiv, with access to minerals effectively traded for military assistance. A U.S. minerals agreement under development with the Democratic Republic of the Congo and Rwanda is tied to a peace deal brokered by Washington. Though successful outcomes for the United States has yet to be demonstrated, these deals nonetheless indicate a new strategic approach to linking conflict situations with critical minerals agreements. In both cases, it was the immediate security needs of the counterparties that sparked the discussions, not the United States.

For supply chain vulnerabilities that threaten U.S. national security itself, domestic sources are considered the most secure and reliable. Within this context, international partnerships can take two forms. First is coordination on supply chain diversification efforts, such as aligning trade policy, intervening to prevent price distortions, and pursuing other forms of collective action to ensure fair competition. The second is leveraging the production capacity of partners to serve as a bridge. This entails filling near-term gaps in U.S. supply or capabilities with imports without undermining efforts to build domestic capacity that can eventually address national security needs in the long-term.

A key example of the first approach is the Quad’s new Critical Minerals Initiative, launched in July 2025. Although little is known about its scope and substance, and momentum has stalled due to tensions with India, the announcement nevertheless demonstrated how critical minerals are being woven into Indo-Pacific security dialogues. The attention on the Indo-Pacific bodes well for Indonesia. As a dominant producer of nickel worldwide, it is uniquely positioned to promote market transparency, address price distortions, and supply materials to the United States. There are, however, two limitations that may pose challenges. Indonesian nickel is well suited for battery production but is less relevant for other critical defense needs because of its grade and form. Perhaps a bigger challenge is pricing: the low prices of Indonesian nickel continue to weigh on the economics of projects worldwide, making it important to find an arrangement that does not threaten the long-term economic viability of U.S. domestic production.

U.S.-Indonesia Trade Discussions: Economically Driven Opportunities and Tensions

Copper and nickel—the minerals at the core of the U.S.-Indonesia relationship—stand apart from many other critical minerals: their large production volumes and exchange-based trading make it difficult for any one producer or country (outside of China) to shape market dynamics, though Indonesia is beginning to develop notable market power in nickel. For the United States, with only a single operating nickel mine and just roughly 5% of global copper extraction and 3% of copper refining, domestic policies are insufficient to shift market dynamics. Partnerships with other major producers and buyers are therefore essential to addressing global challenges such as market distortions and oversupply and to make the field more competitive.

Indonesia is too important and too large a producer to exclude from U.S. critical mineral policy, especially if Washington wants to level the global playing field in copper and nickel. Already the world’s top nickel producer and a rising cobalt player, Indonesia is also a significant source of copper and bauxite. U.S. companies, notably Freeport-McMoRan in Papua Province, are embedded in the Indonesian landscape, creating openings for alignment—if the two states are willing.

The recent trade negotiations between the United States and Indonesia, culminating in a trade agreement framework announced at the end of August, have both highlighted opportunities for potential cooperation on critical minerals and brought deeper tensions to the surface. In a show of classic reciprocity, the United States agreed to reduce its reciprocal tariffs on imports from Indonesia to around 19% (down from roughly 32%), in exchange for Jakarta eliminating 99% of tariffs on a wide range of U.S. industrial and agricultural goods. Indonesia also committed to helping address global steel overcapacity—a move that could be extended to nickel and copper under a future critical minerals deal.

The joint statement left the impression that Indonesia might relax its export bans on raw minerals. Yet, Indonesian officials quickly clarified that the bans would remain in place. The United States lacks the midstream capacity to process raw minerals from Indonesia. However, downstreaming is a core national policy that Indonesia does not want to appear to be backing away from. The United States’ push for domestic production already sits uneasily alongside any deal that expands Indonesian supply, especially with an administration acutely sensitive to foreign competition. Both countries want to signal commitment to building domestic value chains. The core issue is not the pursuit of domestic capacity itself but ensuring fair competition between domestic producers in both countries.

The framework agreement does not tackle the broader question of fair competition, which includes addressing market and price distortions. These issues are at the center of the ongoing Section 232 investigation on critical minerals. Indonesia’s export bans and other policies will also be considered under this context, not to assess the United States’ potential to source raw material but to evaluate their market-distorting impacts.

Alignment and coordination on market and price transparency, measures to counter price distortions, and overcapacity are important to strengthen the U.S.-Indonesia partnership for critical minerals. For example, greater data sharing, not just on production capacity but on prices and subsidies, combined with commitments to work together to address concerns related to market-distorting subsidies, would be key. Such efforts, however, are also likely to invite closer scrutiny of Indonesia’s critical mineral operations, particularly those owned or operated by Chinese companies. The outcome of the Section 232 investigation will shape how Washington approaches these issues and which policy levers the Trump administration deploys. Regardless of the tools chosen, Indonesia’s willingness to embrace transparency and promote fair competition—as its already doing in the case of steel—could lay the foundation for a more durable and mutually beneficial partnership on critical minerals.

Zoe Oysul is a Senior Policy Analyst with the Center for Critical Minerals Strategy at SAFE.