This is a big deal with long-term effects.
President Biden is set to finalize a proposed new Buy American rule that will, eventually, require products purchased by the federal government with taxpayer money to consist of at least 75 percent of US-made materials. Clearly, this will have a huge effect on automakers and, at the same time, significantly boost American manufacturing and reduce dependence on imported materials. Semiconductor chips should immediately come to mind.
The federal government currently spends over $600 billion annually and is required to buy from American companies whenever possible. At present, 55 percent is the minimum threshold in order to qualify. Under the new policy, this will increase to 60 percent this October, 65 percent in January 2024, and 75 percent in January 2029. We've known this new policy was in the works as early as last July and now the details are coming out.
The administration's goal is obvious: push US manufacturers to source products within the US. Doing so should also shorten supply chains that have become increasingly globalized over the past 20 years. Automakers should embrace the new rules for obvious reasons. At present, the chip shortage is still causing headaches as new vehicles, such as the Ford Bronco, cannot be shipped to dealerships because they lack vital chips. Ford has been forced to park thousands of Broncos in outdoor parking lots, exposed to the elements, all because they lack a thumbnail-sized chip. Expectant owners are less than thrilled.
A complete list of critical products, beyond what's needed for new vehicles, will be created as part of a separate rulemaking process.
The focus will be on components deemed "critical to America's economic security and national security." As more details of the plan are being revealed, President Biden, along with the CEO of Siemens USA, are set to jointly announce a new $54 million expansion plant for the country's electrical infrastructure, a key factor for EV chargers and more.
Non-US-based automakers like BMW, Hyundai, and Volkswagen, all of whom have major production facilities in the country, might face more difficulty adjusting their supply chains compared to domestic rivals like GM and Ford. They have time but big changes like these require years of planning.