President Trump signs executive order about domestic production, HHS defers Medicaid payments, and more…

IN THE NEWS:

• President Donald J. Trump signed an executive order directing the U.S. Department of Defense to reduce U.S. military reliance on critical materials and supply chains from foreign adversaries. The order mandates that defense contractors document exhaustive efforts to find domestic or allied alternatives before seeking foreign material waivers. The order also requires contractors to map their entire supply chains and prioritize authorized alternatives over foreign adversary suppliers or risk losing contract opportunities. The White House stated that “despite longstanding prohibitions” on sourcing sensitive materials from foreign adversaries, contractors have “historically under-prioritized” supply chain resilience and domestic production.
• The U.S. Department of Health and Human Services (HHS) deferred more than $1 billion in federal Medicaid payments to California and Minnesota pending review of Medicaid claims with a high risk of fraud, marking the largest payment deferral in the agency’s history. The Centers for Medicare & Medicaid Services identified claims requiring additional documentation before federal payments could be released—totaling approximately $867.5 million to California and $199 million to Minnesota—stating that the payments are being deferred rather than permanently withheld. HHS stated that the action is part of a broader effort to strengthen the integrity of the Medicaid program and prevent fraud before federal funds are disbursed. The deferrals may increase scrutiny of state Medicaid claims and signal a more aggressive federal approach to reviewing high-risk Medicaid expenditures.
• President Trump signed three proclamations covering cars, alcohol, and dairy exports under the Tariff Act of 1930, imposing 50 percent tariffs on Canadian imports in response to “Canada’s discriminatory treatment” of U.S. goods. The tariffs apply to covered goods regardless of whether they are protected by the United States-Mexico-Canada Agreement—the free-trade pact for goods moving across North American borders that President Trump refused to renew. The Trump Administration argued that Canada is one of only two countries, including China, that retaliated against President Trump’s tariffs rather than negotiate a deal. The tariffs will take effect 30 days after signing, leaving time for negotiations between the two countries.
• The U.S. Fish and Wildlife Service (FWS) finalized a rule that prevents threatened species from automatically receiving protections upon listing. The Endangered Species Act prohibits certain actions that may affect endangered plants and animals, but allows the Secretary of the Interior to decide what actions are prohibited in relation to threatened species. Under the Act, endangered species are at a more immediate risk of extinction than are threatened species. Previously, the prohibitions that applied to endangered species also applied to threatened species, unless FWS issued a rule specifying different regulations. Under the new rule, newly listed threatened species will not automatically receive the same protections as endangered species and will instead receive only the protections specified by FWS. FWS claimed that the rule aligns with the best reading of the statute, but conservation groups argued that the rule will leave threatened species unprotected.
• The U.S. Department of Homeland Security (DHS) issued a rule setting fixed time periods for student visas and visas issued to foreign journalists. Previously, academic visas applied for the duration of the visa recipient’s status as a student enrolled in a course of study, but, under the new rule, student visas will have specific expiration dates. Visa recipients who do not complete their studies before the expiration date will be required to apply for a visa extension or leave and re-enter the country. DHS claimed that the limited terms for student visas are necessary to prevent abuse of the student visa system. Critics of the rule contend, however, that the set terms will make it harder for international students to study in the United States, which may harm the international standing of American universities.
• The U.S. Department of Energy and the Kingdom of Saudi Arabia signed a peaceful nuclear cooperation agreement, known as a “123 agreement.” Pending approval by the U.S Congress, the 123 agreement will establish the legal framework for a decades-long, multibillion dollar partnership to develop civil nuclear energy in Saudi Arabia. The agreement will expand access for U.S. companies in Saudi Arabia’s nuclear energy program and support U.S. jobs, nuclear technology exports, and supply chain development. The partnership aims to uphold nuclear safety, security, and nonproliferation standards. President Trump announced that the agreement is subject to Saudi Arabia joining the Abraham Accords, which aim to establish formal diplomatic and economic relations between Israel and Arab Nations.
• The U.S. Food and Drug Administration (FDA) launched a pilot program that prioritizes the review of applications for veterinary drug products and active pharmaceutical ingredients manufactured in the United States. The program offers expedited review of qualifying chemistry, manufacturing, and controls (CMC) submissions and permits sponsors to include a second domestic active ingredient source in original applications rather than submitting a supplemental application after approval. The FDA stated that the pilot aims to strengthen domestic manufacturing, reduce supply chain disruptions, and help prevent animal drug shortages. The agency will evaluate the program’s effectiveness and may revise the program based on stakeholder feedback and implementation experience.
• The U.S. Equal Employment Opportunity Commission (EEOC) proposed rescinding regulations that require employers and other covered entities to submit annual reports summarizing employees’ race and sex, eliminating a reporting requirement that has existed for nearly 60 years. The proposed rule would also eliminate related recordkeeping requirements, which the Commission estimated impose nearly $275 million in annual compliance costs on employers. The EEOC concluded that the reporting requirements are unnecessary to enforce Title VII of the Civil Rights Act of 1964, the main federal law prohibiting private-sector employment discrimination, absent a specific allegation of discrimination. If finalized, the proposal would substantially reduce the EEOC’s collection of workforce demographic data while still preserving the agency’s authority to request tailored information during individual investigations.

WHAT WE’RE READING:

• In a Brookings Institute essay, Anthony F. Pipa, a senior fellow in the Center for Sustainable Development at Brookings, and Julia Davatzes, a climate displacement consultant, analyzed how policies of the Federal Emergency Management Agency (FEMA) affect rural communities. Pipa and Davatzes noted that although rural counties account for more than half of the counties included in FEMA disaster declarations, rural areas face challenges in accessing federal funds. FEMA requires areas receiving aid to contribute their own money to match a portion of the funds received from FEMA and distributes aid by reimbursing local governments, both of which can burden rural communities that tend to have smaller tax bases and fewer financial resources than other areas. Pipa and Davatzes recommended changes to help FEMA better serve rural areas, including adjusting FEMA’s cost-share and reimbursement model.
• In a recent Brookings Institution essay, Anna Vinals Musquera and Scott Babwah Brennen of the New York University Center on Technology Policy argued that regulatory uncertainty presents a greater obstacle to innovation than regulation itself. Musquera and Brennen examined empirical research on artificial intelligence, privacy regulation, medical technology, and other industries, and concluded that evidence linking regulation to reduced innovation is mixed, while evidence concerning regulatory uncertainty is more consistent. They explained that unpredictable rules and enforcement discourage investment, particularly among smaller firms, by increasing perceived risk and delaying long-term planning. Musquera and Brennen recommended reducing regulatory uncertainty through clear guidance, predictable enforcement, and stable regulatory frameworks while advancing public policy goals.
• In a recent working paper for the Organisation for Economic Cooperation and Development (OECD), Becky King, a policy analyst for the OECD Public Governance Directorate, and several coauthors explained that policymakers regulating the digital economy face key questions on whether and how to intervene to balance innovation against fast-evolving risks. King and her coauthors found that governments often rely on mixed approaches that combine both public and private responsibility, with regulators keeping ownership of the rules’ objectives while letting companies design their own methods for meeting those goals. They recommended that regulators invest in increasing their capacity to track emerging technology, hold ongoing conversations with industry, and develop their own tools and expertise to ensure mixed approaches can adapt as markets evolve.

EDITOR’S CHOICE:

• In an essay in The Regulatory Review, Timothy D. Lytton, a law professor at Georgia State University College of Law, argued that the insurance industry can help ensure that farms comply with food safety standards. Lytton noted that contaminated food, and especially fresh produce, causes significant numbers of hospitalizations and deaths each year, but that FDA does not have the resources to inspect every farm that supplies produce to the market. Because farmers purchase insurance that includes coverage for foodborne illnesses, insurance companies can offer premiums that encourage farmers to prioritize food safety and can give farmers advice on food safety management. Lytton observed that only the more expensive insurance policies purchased by large agribusinesses currently include risk management advice. Lytton suggested that government subsidies or smaller farms creating pools to purchase joint insurance policies could help other farmers purchase insurance policies that would reduce food safety risks.