During the campaign, Joe Biden’s “Buy American” promise involves federal government spending to buy more local goods and galvanize the manufacturing industry. He may need to deliver on his promise if the US economy will rise again.
There is a need for increased domestic consumption as 2020 saw the economy wrecked by the pandemic. Many companies managed to survive, but they need help recovering to pre-COVID output. Currently, manufacturing is 3.4% below last year’s levels. While lower, it is a marked improvement from the slowdown earlier last year. Thankfully, consumer demand for automobiles and household appliances kept many factories busy.
Biden’s “buy American” promise follows those of earlier presidents’ campaigns. President Donald Trump himself issued executive orders supporting local manufacturing. His EOs encouraged federal purchases of local goods. At the same time, he slapped tariffs to make foreign products more expensive. However, these orders produced mixed results. Some companies did benefit from increased sales, but other firms faced much higher expenses. At the same time, manufacturers began asking the federal government to give priority to their products. During the campaign and after the election, Biden committed to tightening “buy American” rules.
He proposed federal spending of $400 billion for infrastructure works that require US-made steel. Also, he suggested the local manufacture of protective gear for medical workers, especially those assigned to coronavirus cases. In addition, Biden proposed that Congress spend $300 billion for new product research and development. In a November speech, Biden spoke of increasing local sourcing: “From autos to our stockpiles, we’re going to buy American.” Outside of published “Buy American” proposals found on Biden’s official and campaign sites, program specifics for this initiative do not have more detail.
Easier Said than Done
Experts think that while well-meaning, Biden’s “Buy American” promise is easier said than done. If the looming Georgia senate runoffs end up with a GOP win, Biden will face a divided congress. Democrats control the majority of the House, but with a slimmer margin than before. A Republican Senate will definitely have a mind of their own.
The need for increased domestic consumption became apparent as the pandemic ground the US economy to a halt in 2019. While many American manufacturers withstood the slowdown, they will need all the help they can get to go back to pre-COVID19 output levels. Currently, manufacturing is 3.4% below last year’s levels, still low but loads better than during the height of the pandemic in April. Thankfully, consumer demand for automobiles and household appliances kept many factories busy.
Meanwhile, some experts think that increased federal purchases for American made products can only do so much. It will definitely help the factories and companies who’ll get contracts. However, it can only provide a limited impact on the overall manufacturing industry. In addition, “Buy American” policies carry risks that extend beyond higher manufacturing costs. Countries that will get left out of the US market can retaliate against US exports. This includes import quotas and higher tariffs. In previous practices, the US slapped tariffs in favor of local companies. These benefited companies that have readily available raw materials back home. It’s a different story for companies that import their materials from abroad, as they had to deal with increased costs due to retaliatory efforts.
US and China Disputes
On the other hand, trade and security disputes between the US and China can help boost “Buy American” initiatives. Supply chain issues that occurred during the pandemic, plus increasing mistrust between the two largest economic powers in the world can help present the case for local consumption.
In order for the “Buy American” plan to succeed, the US consumer market must be willing to pay more for domestic goods. Doing so covers startup costs and brings back local supply chains that disappeared once overseas production became the standard.
Some Are More Ready Than Others
In some cases, American companies are ready to embrace the return of American made products even if it costs higher. Wireless communications equipment manufacturer Morey Corp. started relocating its operations from Asia five years ago. The company said that many clients are willing to pay more for their locally-produced products if it meant better quality and more service support. If the Biden administration is serious with their “Buy American” program, Morey thinks they’re ready to accept more government projects.
Other manufacturers, especially those who sell abroad and who rely on global supply chains, believe a “Made In America” policy can hurt them instead. Importing raw materials from countries such as China will entail paying tariffs. In the case of QYK brands, which make surgical masks using Chinese fabric, the tariffs make the raw materials more expensive than Chinese ready-made masks. This is why QYK switched to manufacturing disinfectant wipes instead.
Make “Buy American” Work for All Americans
If Biden’s “Buy American” promise is to come true, the administration must ensure that this move helps the economy and not just a few manufacturers. Otherwise, it will only add to the problems of rising costs within the US economy. In addition, it can also escalate trade wars all over. This means asking Americans to buy more expensive goods without any added benefit to the consumer.
Watch the Associated Press report detailing President-elect Joe Biden’s campaign proposal to bolster U.S. manufacturing and technology firms and promote “Buy American.”:
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