WASHINGTON—President Donald Trump is planning to sign an executive order on Tuesday that will crack down on exemptions to federal “Buy American” policies, a move that could hurt Canadian companies.

The administration’s new policy is to “minimize the granting of waivers,” an official who insisted on anonymity said in a briefing on Monday.

“The message here is clear: Buy American is the Trump administration’s highest priority,” the official said. “When it comes to spending taxpayer dollars, agencies have their clear marching orders, and they will be held strictly accountable for any failure to fulfil the Buy American vision.”

Buy American provisions require the government to use American firms rather than foreign firms.

The North American Free Trade Agreement is supposed to protect Canadian firms from Buy American on significant purchases. For example, Canadian firms are allowed to compete for goods contracts of more than $25,000 U.S. and construction contracts of more than $10.1 million.

But an expert on Canada-U.S. trade, Dan Ujczo, said the order will likely do immediate harm to Canadian businesses anyway, sending a clear message to U.S. government officials that they should not favour bids that involve foreign firms and materials.

“It sends a chilling effect down to all the agency heads, where they’re not going to even consider bids that have foreign components from Canadian suppliers,” said Ujczo, an Ohio lawyer with Dickinson Wright. “It’s going to send that chill all the way through agencies and departments that are otherwise inclined to favour the most efficient and cost-effective bid.”

The chill might extend further. The order, Ujczo said, will likely prompt some U.S. companies to use domestic suppliers rather than better-value Canadians. And state governments might now choose to avoid foreign firms in projects funded in part by Trump’s federal government, he said.

The usual caveats apply. Canada was not mentioned during the briefing. As with most of Trump’s executive orders, it was not clear how much it was intended merely to serve as political rhetoric rather than make actual change.

But the order signals that Canadian officials have a Buy American fight on their hands as they head into a possible renegotiation of NAFTA. Among other things, the order will instruct the U.S. “to take a very hard look at how waivers of Buy American in our free trade agreements may be a poster child of unfair and non-reciprocal trade,” an official said.

Canadian officials have lobbied against Buy American for years, with varying success. They managed to secure a partial exemption for Canada from the economic-stimulus law signed by Barack Obama in 2009.

Big Canadian companies with U.S. operations and top lawyers will likely manage to manoeuvre around Trump’s crackdown, but smaller firms will be hit harder, Ujczo said.

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