America's largest provider of terminations, Planned Parenthood, described the new measure, which has delighted pro-life conservatives, as “designed to undermine women’s health”.
The new law nullifies a rule finalised in the last days of the Barack Obama administration that effectively barred state and local governments from withholding federal funding for family planning services, regardless of whether groups offering these services also performed abortions.
The new measure cleared Congress last month with Vice President Mike Pence casting the tie-breaking vote in the Senate.
Planned Parenthood said the bill did not actually defund them, but could embolden states to try and block access to healthcare, estimating the measure could affect up to four million people who access reproductive healthcare services with federal grant funds.
The previous Department of Health and Human Services regulation, which took effect two days before Mr Trump’s inauguration, said that states and localities could not withhold money from a provider for any reason other than an inability to provide family planning services.
Under the new legislation states will be able to withhold money from any provider that offers abortions.
Government money already does not go directly towards providing abortions in the US, except in cases of rape or incest, or to save a woman’s life.
Earlier this year, the Guttmacher Institute noted the availability of abortions is at historic low, with only 788 clinics left in the United States. Several states only have one.
In the three months since he took office, women's rights group have accused Mr Trump of waging a war on women’s healthcare.
In January, he reinstated and expanded the global gag rule, meaning a wide range of health organisations combating HIV or the spread of Zika will be banned from all US global health funding if they also provide counselling, referrals, or services for safe and legal abortion.
Conservatives, on the other hand, have praised Mr. Trump for his anti-abortion measures.
“Prioritising funding away from Planned Parenthood to comprehensive health care alternatives is a winning issue,” Marjorie Dannenfelser, the president of the Susan B. Anthony List, an anti-abortion group, told the New York Times. “We expect to see Congress continue its efforts to redirect additional taxpayer funding away from Planned Parenthood through pro-life health care reform after the spring recess.”
Abortion rights activists condemned the new law, arguing that it would harm women’s health.
Dawn Laguens, the Executive Vice President of Planned Parenthood said: “Planned Parenthood strongly opposes President Trump’s willingness to undermine millions of women’s access to birth control through the Title X family planning program. Four million people depend on the Title X family planning program, and by signing this bill, President Trump disregards their health and well-being.
“We should build on the tremendous progress made in this country with expanded access to birth control, instead of enacting policies that take us backward. Too many women still face barriers to health care, especially young women, women of colour, those who live in rural areas, and women with low incomes.”
She added: “Women marched in historic numbers the day after the inauguration because they feared the worst. Their worst fears are now coming true. We are facing the worst political attack on women’s health in a generation as lawmakers have spent the past three months trading away women’s health and rights at every turn."
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