Australia will examine its free trade deal with the United States to see if Washington is flouting its obligations under the pact if it adopts a "Buy American" clause for new stimulus projects.

America's key trading partners, including Australia, are alarmed at the clause, which seeks to ban the use of foreign steel and iron in major US infrastructure projects.

Australia stands to lose $500 million in steel exports to the United States if the Congress adopts the measure, part of the $US819 billion ($A1.26 trillion) financial stimulus package.

Prime Minister Kevin Rudd is warning a reversion to protectionism is a "spear at the heart" of the Australian economy because so many jobs are generated by export markets.

US President Barack Obama has been talking down the "Buy American" push, warning it would be inappropriate to send a protectionist message in the current economic climate.