"Buy American" and similar domestic purchase policies impose high costs on taxpayers

August 6, 2020

"Buy American" and similar domestic purchase policies impose high costs on taxpayers

“Buy American” and similar buy national requirements for public procurement come with heavy price tags. Using a computable partial equilibrium model, Gary Hufbauer and Euijin Jung estimate that “Buy American” requirements increased US domestic procurement costs across federal and state governments by 5.6 percent in 2017, costing US taxpayers an additional $94 billion. Buy national requirements abroad place a similar burden on taxpayers, with protection in the European Union’s public procurement practices incurring additional costs of $471 billion in 2017.

Rather than creating new jobs, buy national procurement requirements shuffle jobs from other sectors of the economy to the procurement sector, reducing economic efficiency and driving up procurement prices. As such, very little of the additional money goes to workers. Instead, the extra cost is largely lost to inefficient production and higher profits collected by firms.

This PIIE Chart was adapted from Gary Clyde Hufbauer and Euijin Jung’s blog post, “The high taxpayer cost of ‘saving’ US jobs through ‘Made in America’.

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Gary Clyde Hufbauer Senior Research Staff
Euijin Jung Senior Research Staff

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