This is the contradiction of Trumpenomics.
As the Wall Street Journal notes, if Trump manages to get his infrastructure spending bill through Congress, then it will likely include a “Buy American” provision.
It’s something he’s talked about over and over again.
He even added it to his executive order on the Keystone Access Pipeline, insisting that steel used in the pipeline be American made.
This will make projects more expensive because American steel is more expensive than, say, Chinese steel.
The Obama administration actually slapped a 500% tariff on Chinese steel, but all that did is make life harder for manufacturers.
But that’s not even the worst part of it. The worst part is that the definition of what is and is not American steel is weird.
For example, a foreign government can own a steel company and the steel can still be considered “American made” if the company has factories in the US. Also, according to the Buy American Act of 1933, which was revised in the 1980s, the steel can even be sourced from other countries. It just has to be melted here.
Steel isn’t melted anymore
The problem is US manufacturing, and the global supply chain, have evolved even beyond that.
Steel isn’t melted anymore. Instead, manufacturers use something called “slab converters” to form steel that could’ve been acquired from anywhere. This doesn’t meet the “Buy American” legislative standard, and this has cost companies with American workers and American mills in the past.
The US steel industry is, of course, worried about all of this, so they’re working to get the definition of “Buy American” changed.
The question, then, is whether or not the Trump administration will play ball with them on that. And there’s reason to believe that they won’t.
Ideologically, the Trump administration’s economic goal is not to modernise the economy, it’s to internalize it. That is to say, the underpinning of their policy is to have more things made at home — global supply chains be damned.
We know this because Trump’s trade czar, Peter Navarro told the Financial Times exactly that:
“It does the American economy no long-term good to only keep the big box factories where we are now assembling ‘American’ products that are composed primarily of foreign components,” he told the Financial Times. “We need to manufacture those components in a robust domestic supply chain that will spur job and wage growth.”
So the Trump administration could easily to throw another requirement into this “Buy American” mix — reshoring a company’s global supply chain.
Let’s call a policy like this what it is is: an onerous regulation that could cost companies a ton of money. Wall Street has been sending stocks higher and higher on the idea that Trump will deregulate and lower taxes, but Navarro’s talk flies in the face of all that and will have real consequences in the event that an infrastructure bill is actually passed.
Of course, the prospect of the passage of a $US1 trillion infrastructure bill is still sort of in the air anyway. Republicans like Senate Majority Leader Mitch McConnell (R-KY) have been hating on the idea on its worst days, and paying it lip service on its best.
“We expect to get some kind of recommendation on an infrastructure bill, a subject that we frequently handle on a bipartisan basis,” he said on Friday, according to Reuters, which framed this quote as McConnell giving those who want a bill like this to pass “hope.”
The problem is he provided no details along with that statement, and it’s unclear what he means by it. Democrats have already introduced a $US1 trillion plan to work off of, if he wants to start somewhere in a bipartisan fashion.
Even more suspect was his use of the word “frequently” before the word “bipartisan.”
Sounds like he’s new around here or something.