WASHINGTON — With a swipe of a pen Tuesday, U.S. President Donald Trump issued a new executive order directing the federal government to reemphasize "Buy American" laws — a move which analysts say could impact the existing supply chain for the U.S. defense industry.

The order is focused on tightening the process under which all federal agencies — including the Department of Defense — get waivers from the 1933 Buy American Act. It would also create a series of reviews of America's policies and reforms of the H-1B visa program.

The core of the document involves the creation of a 150-day review period, wherein agencies will have to assess how well they follow applicable Buy American laws and whether they are relying too much on waivers for goods that could be produced domestically. During that same time period, the Secretary of Commerce and the United States Trade Representative will look over various free trade agreements and the World Trade Organization Agreement in order to judge their impact of Buy American laws.

Those reports will be worked together into a final report to the White House on the implementation of Buy American laws, within 220 days of the EO being issued, a report that will become an annual requirement going forward.

At least one Senate Democrat welcomed the executive order. Sen. Chris Murphy of Connecticut has claimed that the DoD, the largest purchaser of manufactured goods in the world, has spent nearly $200 billion on manufactured goods made by foreign companies in the last decade through the use of hundreds of thousands of waivers of the Buy American Act and other government purchasing laws.

But Andrew Hunter, a former Pentagon acquisition official and Congressional staffer, now with the Center of Strategic and International Studies, saw no glaring problem with DoD waivers to domestic-source restrictions and that most purchases "are extremely high U.S. content."

"There is very substantial compliance with the act, and less than 7 percent of all purchases are associated with coming from a foreign entity, and a significantly smaller share are actual waivers to Buy America Act requirements," he said. "Waivers are pretty rare."

Hunter called the U.S. defense industry an all-star when it comes to providing domestic manufacturing jobs, a fact that may not  be readily apparent. And he praised the White House for pushing a review before making changes, saying it’s likely to find that the number of waivers have actually fallen from a recent peak during the Iraq and Afghanistan wars. Fuel in overseas operations and perishables at foreign bases in Germany and Italy likely make up the most of it.

Supply chain ripples

Waivers will still be allowed under specific conditions; that may mean the impact of the EO on the defense industry will eventually be limited, in part because the defense sector in 2017 is finding it almost impossible to find a prime program that is truly "American."

Take the Air Force competition to replace its trainer aircraft, known as the T-X program. The main competitors there are all American companies teamed with international partners: Lockheed Martin is teamed with Korean Aerospace Industries; Boeing is teamed with Swedish giant Saab; DRS Technologies is teamed with its parent company, the Italian-owned Leonardo; and Sierra Nevada is working with Turkish Aerospace industries on their offering.

The F-35 joint strike fighter, meanwhile, is designed specifically to have industrial participation from Australia, Canada, Denmark, Italy, the Netherlands, Norway, Turkey, and the United Kingdom, putting an inherently international supply chain at the heart of the Pentagon’s largest acquisition program.

Because of that international nature, the supply chain is more likely to be where protectionist policies are felt, at least in the early days, says Byron Callan, an analyst with Capital Alpha Partners.

"It may matter more for steel or aluminum than end products like aircraft," Callan said. "If you increase demand for U.S. steel, it may have a knock-on effect on raw materials pricing."

Another change that may have long-last impacts would be cracking down on the use of H1-B visas for foreign technical talent, something the Trump administration has been vocal about planning to do. Reducing the supply of foreign engineers would logically increase the number of those jobs to U.S. workers.

But, Callan notes, that demand increases across all technical sectors, which means the defense industry would be in even hotter competition with the commercial sector to keep employees, when the commercial technology sector already offers generally higher wages and better perks.

Jeff Bialos, a former deputy undersecretary of defense for industrial policy now with Eversheds Sutherland, says the U.S. defense industry has looked abroad, particularly in the supply chain, for three reasons: lower cost, a capability the U.S. cannot match, and as trade-offs to encourage sales of U.S. equipment abroad to partners.

A major change to the use of waivers at DoD

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would impact cost chains to primes, and also increase program costs if primes have to requalify systems and to seek alternatives to foreign vendors," Bialos said. "The president came into office looking for more affordable contracting. 'Buy American' restrictions are at odds with getting the most affordable solutions for the customer."