How Trump’s ‘Buy American’ executive order could play out

When President Donald Trump signed an executive order Tuesday in Kenosha, Wis., he sent a characteristically blunt message.

“The policy of our government,” Trump declared, “is to aggressively promote and use American-made goods.”

For too long, he complained, U.S. companies that have bid on government contracts — for work ranging from roads to supplying computer equipment to federal agencies — have unfairly lost out to foreign competitors.

“Buy American” requirements that are written into U.S. law “have been gutted,” he said, by loopholes. Countless jobs and contracts have been lost to cheap, subsidized and low-quality foreign goods, Trump asserted.

Here’s a look at the issue. What is it?

The Buy American Act of 1933 requires the government’s purchases to favor U.S.-made products. Exemptions

Government contracting “is a highly complex area, with lots of exceptions and exceptions to exceptions,” says Stephanie Harden, a lawyer specializing in government contracts.

Government agencies can bypass U.S. suppliers, for example, whose bids come in too high or if the required goods and services aren’t available domestically. Under several free-trade deals, contractors from 59 countries have the right to be treated the same as U.S. companies when it comes to many federal contracts.

But the U.S. Government Accountability Office, a federal watchdog agency, reported in February that under a WTO procurement agreement, foreign companies have gained far more access to U.S. government contracts than American companies have gained to overseas government contracts. What will order do?

Not much — at least initially.

Trump is ordering government agencies to review the way they award contracts and to make sure they “maximize the use of materials produced in the United States.”

By November, Commerce Secretary Wilbur Ross and the Office of the U.S. Trade Representative must recommend ways to strengthen Buy American requirements. What’s next? Not clear. Harden is telling clients to make doubly sure that they are complying with Buy American requirements.

But some analysts note that Trump has already retreated from some earlier vows to toughen America’s trade policies.

And Trump’s approach could prove costly to U.S. taxpayers and consumers. By making it harder for foreign companies to compete for contracts, the U.S. government would be allowing American companies “to raise their prices and reduce their quality,” says Daniel Ikenson, director of the trade policy center at the libertarian Cato Institute.