'Buy American' Rule Upped for Federal Projects
The “Buy American” policies initially set forth by former President Donald J. Trump got a boost earlier this week as President Joe Biden signed a new executive order aiming at increasing government purchases of American-made products.
During comments surrounding the order, Biden mentioned his Build Back Better Recovery Plan, and noted that the Buy American order would help in the effort to rebuild infrastructure.
“Here’s what else we’re going to be doing. Under the Build Back Better Recovery Plan, we’ll invest hundreds of billions of dollars in buying American products and materials to modernize our infrastructure, and our competitive strength will increase in a competitive world,” Biden said.
“That means millions of good-paying jobs, using American-made steel and technology, to rebuild our roads, our bridges, our ports, and to make them more climate resilient, as well as making them able to move faster and cheaper and cleaner to transport American-made goods across the country and around the world, making us more competitive. It also means replenishing our stockpiles to enhance our national security.”
The new order mainly reinforces the government procurement and procedure rules, making it harder for federal agencies to purchase imported products or to get an exception to the Buy American rule.
Section 1 states: “It is the policy of my Administration that the United States Government should, consistent with applicable law, use terms and conditions of Federal financial assistance awards and Federal procurements to maximize the use of goods, products, and materials produced in, and services offered in, the United States. The United States Government should, whenever possible, procure goods, products, materials, and services from sources that will help American businesses compete in strategic industries and help America’s workers thrive. Additionally, to promote an accountable and transparent procurement policy, each agency should vest waiver issuance authority in senior agency leadership, where appropriate and consistent with applicable law.”
In his comments, Biden noted that in 2018 alone, the Defense Department spent $3 billion on foreign construction contracts, “leaving American steel and iron out in the cold.”
Buy American Background
Trump expanded the Buy American platform almost in tandem with his steel and aluminum tariff initiatives.
The first executive order, known as Buy American and Hire American, was signed on April 18, 2017, and the second, Strengthening Buy-American Preferences for Infrastructure Projects, was signed on Jan. 31, 2019. Though Trump’s tariffs did provide a short boost for both prices and manufacturing, the import taxes did not result in a boom in manufacturing jobs.
“Things came back down to earth this year because the demand pulled back and industrial economy has softened,” said steel industry analyst Phil Gibbs at the time. “Now you’ve got a year where spending in the energy sector is down, auto is down, nonresidential construction is down and durable-goods orders are falling. You do have real demand weakness in the U.S. industrial economy.”
In July of 2019, Trump signed an order that expanded the use of American-made iron and steel in federal projects, pushing the domestic content threshold from 50% to 95%.
Simultaneously, in March 2018, Trump imposed tariffs to affect steel and aluminum imports from other countries across the globe. The assigned duties were 25% on steel products and 10% on aluminum.
Companies that felt they needed to use steel or aluminum from another country—because that particular product wasn’t made in the U.S., for example—had the opportunity to apply for an exemption.
By June, the U.S. allowed the tariffs to go into effect for Canada, Mexico and the European Union, after months of discussion of possible exemptions. The U.S. Department of Commerce also announced the first round of exemptions, while noting that it would be investigating whether some companies in the market were taking advantage of the duties and raising prices unduly.
In May of the following year, Trump continued work on updating the USMCA, Steel Dynamics CEO Mark Millett went on the record to say he believed a quota system would replace the current tariffs that the steel and aluminum industry were subjected to.
However, some in the aluminum industry were reportedly against the quotas, in fear that they would raise prices on aluminum-dependent goods. That same month, Trump later announced that the U.S. would lift its steel and aluminum tariffs imposed on Canada and Mexico in exchange for a new monitoring and enforcement system that will prevent import surges into the U.S. As a part of the agreement, Mexico and Canada would also lift its retaliatory tariffs on American products.
By December 2019, officials from Canada, Mexico and the United States signed a deal once again. The United States-Mexico-Canada Agreement replaced the North American Free Trade Agreement, and both the U.S. United Steelworkers union and the AFL-CIO labor voiced their approval of the deal.
At the beginning of 2020, Trump announced an expansion of tariffs on foreign steel and aluminum, claiming that the existing tariffs were not as successful as he’d hoped in restoring American production.
While imports of steel and aluminum into the United States have declined since the tariffs were established in 2018, imports of products made with the same materials have had a significant increase, according to Trump.
And, in August, the U.S. announced that it was reinstating its 10% tariffs on raw aluminum imports from Canada.
Now, at the beginning of this year, a group of several domestic steel industry associations Biden, urging him to keep steel tariffs and quotas that were set in place by the Trump administration.
The letter was signed by the American Iron and Steel Institute, the United Steelworkers, the Steel Manufacturers Association, the Committee on Pipe and Imports, and the American Institute of Steel Construction.
The letter referenced the tariff and quota program that was established in 2018 as a means to allow the U.S. to “restart idled mills, rehire laid-off workers and begin investing tens of billions of dollars in new and upgraded plants.”
However, the letter notes, those plans suffered a significant setback because of the COVID-19 pandemic. The organizations add that continuing the tariffs and quotes is “essential to ensuring the viability of the domestic steel industry in the face of this massive and growing excess steel capacity.”