By Chris Isidore and Matt Egan, CNN

(CNN) — The US Treasury is phasing out production of the penny and will soon stop putting new one-cent coins into circulation, the department said in a statement Thursday.

The news of the decision was first reported by the Wall Street Journal Thursday.

A Treasury spokesperson said the government made its final order of penny blanks this month, and the United States Mint will continue to manufacture pennies only as long as an inventory of penny blanks exists. Consumers with pennies will still be able to use them for purchases. But without new pennies moving into circulation, businesses that complete cash transactions will have to start rounding up or down to the nearest nickel.

The move is not a surprise. The production of a penny costs more than the value of the coin. President Donald Trump said in February that he ordered the US Mint to stop making pennies, citing the cost.

“For far too long the United States has minted pennies which literally cost us more than 2 cents. This is so wasteful! I have instructed my Secretary of the US Treasury to stop producing new pennies. Let’s rip the waste out of our great nations budget, even if it’s a penny at a time,” Trump said in a post to social media as he returned to Washington from the Super Bowl in February.

Trump actually undersold the cost argument — pennies cost more than three cents each to produce.

But the cost of a penny might be a smaller problem than the alternative. That’s because the Mint actually loses even more money on each nickel it produces. Each nickel costs 13.8 cents, with 11 cents of production costs and 2.8 cents of administrative and distribution costs. These figures are for the government’s most recent fiscal year, which ended in September.

People have been talking about getting rid of the penny for years.

During the most recent fiscal year, the Mint tried to cut those losses by making far fewer nickels — only 202 million, down 86% from the 1.4 billion nickels it minted in each of the previous two years. That’s also far fewer than the 3.2 billon pennies it made in 2024, the 4.1 billion it made in 2023 and 5.4 billion it made in 2022.

The Treasury statement did not address its plans for nickel production. It did estimate an immediate savings to taxpayers of $56 million from the halt of penny production.

“Given the cost savings to the taxpayer, this is just another example of our administration cutting waste for the American taxpayer and making the government more efficient for the American people,” it said.

Even if the Mint has to make only 850,000 additional nickels in 2025 to meet demand, that would wipe out any savings from eliminating the penny. If the Mint goes back up to making 1.4 million nickels a year, that would cost $78 million more than any savings from the pennies it stopped producing.

The Mint would likely have to make more nickels than that — probably in the range of 2 million to 2.5 million a year if it stops making pennies permanently, based on the track record in other countries that dropped their lowest valued currency, said Mark Weller, executive director of the Americans for Common Cents, a trade group funded primarily by Artazn, the company that has the contract to provide the blanks used to make pennies.

“In most countries, the lowest domination coin is the most minted coin,” he said.

But the idea of dropping the penny is supported by others, including some merchants.

The National Association of Convenience Stores has agreed in the past with the idea of getting rid of the penny to speed transaction time, even if only by a second or two for each customer paying with cash.

“Convenience stores sell a lot of products, but what they really sell is speed of service,” Jeff Lenard, a spokesman for the group, told CNN in February. He couldn’t say if nickel usage would increase, but he did say that without the penny cash transactions would be rounded to the nearest nickel.

And the United States wouldn’t be the first to dump its least valuable coin. Canada stopped minting their pennies in 2012 and stopped using them entirely in 2013.

One reason that the US government has to make so many pennies every year is because a large percentage of them don’t remain in circulation. They are stashed in penny jars or junk drawers at home, or they fall on the ground and people don’t even bother to pick them up.

Many people leave behind the pennies they get as change in leave-a-coin-take-a-coin dishes on counters of many retailers. Those dishes are increasingly holding nickels as well, which also have few uses.

“When people start leaving a monetary unit at the cash register for the next customer, the unit is too small to be useful,” said Gregory Mankiw, a Harvard economics professor and former chairman of the President’s Council of Economic Advisers under President George W. Bush.

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