Like Joe Biden with “Buy American” fights against Trump’s resurrection

US President Joe Biden scored an important victory this week. After tough negotiations, his $ 1.2 trillion infrastructure package won an important Senate vote. It has not yet been finalized, but many Republican senators are now also supporting the gigantic project. “We got a historic deal folks. It’s the largest infrastructure program in a century”Biden cheered on Twitter.

Somewhat overshadowed this agreement is another Biden announcement that the rest of the world might not like. Of the billions in taxes that the US government will be hitting out in the coming years, far more than before should end up with American companies and not with foreign companies.

For this purpose, a significant tightening of the “Buy American”Program, which Biden also announced this week. So far, the rule has been that government agencies are only allowed to buy goods that are at least 55 percent domestically produced. This proportion is now to increase to 60 percent and by 2029 to 75 percent.

It’s about billions

This may not sound like a dramatic thing to a layperson, but it is worth billions of dollars. Even without historical infrastructure programs, the US government is the world’s largest consumer of consumer goods, spending $ 600 billion annually on goods and services. “In the past few years “Buy American” become an empty promise”says Biden at a truck factory in Pennsylvania on Wednesday. “My government is going to make Buy American a reality.” Already in the election campaign, Biden had put himself in the limelight with this declaration of war against Trump. Now he wants to show how serious he is about it.

Economists are not surprised by this: “Biden’s goal is to shape globalization more so that it benefits American workers. He buys that with a little more protectionism and higher prices”says Jürgen Matthes, an expert on international economic policy at the Institute of German Economy in Cologne.

“From a purely economic point of view, the tightening of ‘Buy American’ initially has negative consequences for the US government, because it has to buy more expensive products itself”says economist Matthes. For political and economic considerations, however, the move makes sense for Biden. “The more credible and high-profile Biden is with ‘Buy American’, the higher the chance that Trump won’t come back.”

In the USA there are significantly more losers from globalization than here, especially in the industrialized ones “Rust Belt”States. If Biden saves jobs here or at least makes credible efforts to do so, the Democrats could score points in the upcoming midterm elections next year.

Uncertain implications for German companies

The effects of the Buy American policy on German companies are difficult to quantify, says economist Matthes. On the one hand, local companies would have it if the tightening of “Buy American” increasingly difficult to do business with products from Germany with the US government. On the other hand, German corporations are also directly represented in the USA and employ thousands of people there. So you are in parts American yourself and could even benefit from the specifications when placing the order. Siemens, for example, has just received a major order worth billions from the US rail operator Amtrak. The trains are being built in the Siemens factory in Sacramento, California, due to the specifications for domestic production.

Economist Matthes does not believe that Biden’s Buy American push will lead to a similar escalation in trade relations as Trump’s punitive tariffs. After all, Biden has also accommodated the Europeans and especially Germany in other areas, for example in the subsidy dispute between Boeing and Airbus and in the Nordstream 2 pipeline Understand the allies and trading partners. “It should be clear to us in Europe that Biden is trying to prevent Trump from making a comeback. And that is also in the interests of Europeans.”