Trump inauguration: What does 'buy American and hire American' mean?

What could this slogan from Donald Trump mean in practice? And what are its possible implications – both for America and the wider world, including Britain?

Ben Chu
Economics Editor
Friday 20 January 2017 19:08
Comments
US President Donald Trump thanks former US President Barack Obama during the Presidential Inauguration at the US Capitol in Washington DC
US President Donald Trump thanks former US President Barack Obama during the Presidential Inauguration at the US Capitol in Washington DC

In his inaugural speech Donald Trump heralded what sounded like a new era of American economic protectionism.

“Protection will lead to great prosperity and strength,” President Trump proclaimed.

He went on: “We will follow two simple rules: buy American and hire American.”

But what could this slogan mean in practice? And what are its possible implications – both for America and the wider world, including Britain?

What does ‘buy American’ mean?

The strong implication is that Americans will, from now on, be buying American produced goods, rather than importing goods made abroad.

This fits with Donald Trump’s rhetoric on the campaign trail where he railed continuously over the size of the US trade deficit, claiming that this was evidence that other countries were ripping America off through undervalued currencies or unfair trade deals.

So America will no longer be importing?

Never say never with Donald Trump, but this seems most improbable.

A more realistic interpretation is that Trump will carry on doing what he has been doing since winning the election in November: brow-beating and threatening US multinational companies into increasing their operations in the US.

He has talked about slapping a special 35 per cent tariff on firms that build factories abroad and then sell back into the US markets.

But he would need Congressional support to get this through – and it’s far from clear that he would be successful given the vast majority of Republican congressmen and senators are doctrinaire free traders.

What about tearing up trade deals and starting trade wars?

President Trump certainly has more unilateral power in this respect, as this comes under the rubric of foreign policy where the President is much less constrained by Congress.

And the new White House web site already says: “The President plans to show America’s trading partners that we mean business by ensuring consequences for countries that engage in illegal or unfair trade practices that hurt American workers”.

But the honest answer is that we don’t know whether this rhetoric will translate into anything.

Trump has threatened to formally brand China a currency manipulator - but no sanctions automatically follow from this.

Moreover, President Trump's cabinet is full of veteran businessmen such as the incoming Secretary of State Rex Tillerson (a former ExxonMobil CEO) who seem unlikely enablers for any unilateral US measures that disrupt and damage global trade.

Also President Trump himself has made noises about a new US-UK trade deal to come into force soon after Brexit in 2019 - although what terms that deal would be on and whether they would be good for Britain is unknowable.

What about ‘hiring American’?

This probably goes hand in hand with the ‘buying American’.

If a firm invests in the US, rather than abroad, the assumption is that it will also be hiring American workers and increasing domestic employment.

Another reading of the slogan is that Trump will move to compel the US Federal Government to alter its procurement rules, to mandate more purchasing from US firms, rather than foreign firms.

There is actually already a Buy American Act - passed in 1933 - that works along these lines, although it can be waived if the US product is 25 per cent more expensive than the identical foreign-sourced alternative.

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