Trump’s “Buy American, Hire American” Executive Order Could Affect Industry

On April 18, 2017, the White House announced President Trump’s “Buy American and Hire American” executive order.  The executive order aims to promote American manufactures through forcing companies to use American products in their operations.  In addition, the executive order requires American companies to hire U.S. citizens to conduct the company’s operations.  On the surface, this policy sounds beneficial for the American economy because more U.S. resources will be utilized.  However, many U.S. industries, including construction, are anxious about Trump’s executive order.  It has the potential to significantly raise material and labor costs.

Implications of Trump’s Executive Order

This will significantly affect the construction industry.  Materials are often more expensive to buy domestic than abroad.  A good portion of American construction companies utilize overseas markets in order to keep their companies running efficiently by buying inexpensive raw materials.  Abruptly forcing these construction companies to switch to buying American materials would notably increase the costs that these companies would face.  A result of these increased material costs could be: worker layoffs or reduction of company projects in order to help pay the rising material costs the company is facing.  Ultimately, construction company owners are fearful of Trump’s “Buy American” executive order because it will result in rising material costs.  This could subsequently result in owners having to lay off workers or lower the project ambitions of the company.

How Companies Could Disregard Trump’s Executive Order

No company wants to see reducing profits.  Naturally, company owners often look for ways to avoid policies that will negatively impact their operations.  Brian Mahany, an attorney who specializes in whistleblower law, argues how Trump’s executive order will likely lead to increased fraud in the construction industry.  He notes that “they [construction companies] can make attempts to pass off foreign material as American-made” as a means of cutting costs, and not having to buy expensive American materials.

When asked how likely it would be that these companies would be caught, Mahany said “The only way they get caught is if [the government] does an audit. There is little chance of an audit, however, because there are too few federal resources available to perform them.”  This fact is unsettling because it underlines a method that many construction companies could potentially use to bypass Trump’s executive order.  For this reason, Trump’s executive order, given the present amount of resources given to auditing, is a relatively unenforceable policy.

“Hiring American”

“Hiring American” is another term that feels strange to be against because it appears to be a policy that would benefit the United States.  However, for many construction companies, strictly “Hiring American” is a terrifying proposition.  A sizable portion of construction workers are working for these companies under work visa.  For this reason, Trump’s “Hire American” policy could force companies to lay off these workers in exchange for American workers.

But with a labor shortage currently happening, where are these American workers?  This would cause a major hiccup in construction company operations.  A significant portion of their workers would no longer be eligible to work for their company.  Not because of their skill but simply because they are not American.  This would actually increase the construction industry labor shortage because many Americans are not interested in construction jobs.  For the 18 to 25-year-old age group, the interest in the construction industry is below 10%.

Labor Shortage Percentages
Image source: kravelv.com

Conclusion

Without the ability to use the workers that want to work in the industry, because of their citizenship status, could lead to construction companies looking to other methods for completing their projects such as automation. Increasing investment in automation could result in numerous jobs transferring to machines.  Automation taking over jobs is unlikely.  The human equation in construction is still important.  Instead, lack of workers will simply slow down infrastructure and other construction projects.  For these compounded reasons, it is crucial that construction companies are given the option to hire workers on work visas.  “Buy American” and “hire American” may work in other industries. On the other hand, the construction industry is so heavily reliant on workers with Permanent Residence and work visa status. Restricting construction to only American citizens will not work and the labor shortage will get worse.

Original sources: ConstructionDive, WhiteHouse.gov