Last week Bank of America withdrew offers to MBA students on H1 B visas. As a recipient of TARP money from the federal government the bank had to comply with a clause that Congress had inserted into the TARP bill that prohibits TARP recipients from hiring foreign workers with work permits.
Elsewhere, Congress passed the Stimulus Bill after inserting a “Buy American” clause in it that compels the stimulus money to be spent on American steel.
SEC. 1110. USE OF AMERICAN IRON AND STEEL.
(a) IN GENERAL.—None of the funds appropriated or otherwise made available by this Act may be used for a project for the construction, alteration, maintenance, or repair of a public building or public work unless all of the iron and steel used in the project is produced in the United States.
Immediately after this paragraph there are exceptions which water it down substantially but it was still enough to get noticed.
Both these might indicate that protectionism is raising its head in the US. But I think it is unlikely that the US will do anything more than allow some politicians to grandstand on these kinds of legislative actions that have high bark content but very little bite. My confidence is not based upon the good sense of American legislators, which frankly if there is any will be quickly crushed by political calculations in this recession. No, its based upon self interest of the US.
Any serious attempts to curtail competition in goods or services will immediately result in retaliation from other countries. American companies in technology and manufacturing are huge exporters. From Cisco to Caterpillar to Boeing, not one of them will stand by and let Congress enact any legislation that could hurt their prospects outside the US.
And if a trade war wasn’t bad enough for the US economy, imagine what would happen if Asia (China, Japan) were to unload US Treasurys. Whose going to fund the trillion dollar US budget?
My money says that the US will not impose serious trade restrictions. At least not unilaterally. But if unemployment rises to something like 12%, all bets are off.