Please ensure Javascript is enabled for purposes of website accessibility

Trump Invokes Defense Production Act for Coronavirus Response

By John Bromels - Mar 18, 2020 at 1:22PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The 1950 law allows the president to mandate industrial production of emergency supplies.

In a Wednesday press conference at the White House, President Trump announced he would invoke the Defense Production Act (DPA) to mobilize U.S. industries to produce supplies essential to combating the coronavirus. The 1950 law in part authorizes "the diversion of certain materials and facilities from ordinary use to national defense purposes, when national defense needs cannot otherwise be satisfied in a timely fashion." 

President Trump meeting with industry leaders about coronavirus

President Trump meets with industry leaders on COVID-19 response Image Source: White House

Specifically, it allows the president "(1) to require that [certain] contracts ... shall take priority over ... any other contract, [and] to require acceptance and performance of such contracts," and "(2) to allocate materials, services, and facilities in such manner." 

In short, Trump can now use this authority to redirect ordinary U.S. factory output to prioritize items that may be in short supply. This could affect companies like 3M (MMM -0.43%), which makes medical masks, gloves, and respirators; Medtronic (MDT 1.37%), which manufactures ventilators; and Becton, Dickinson & Co. (BDX 1.97%), which makes a wide range of medical products, and is currently working on a coronavirus test. 

DPA: a powerful, rarely used tool

The DPA has only been invoked a handful of times in recent years, and never for a medical emergency.

Barack Obama used its authority in 2011 to require telecom companies like AT&T and Verizon to report on the sources of their network hardware and software to combat potential cyber-espionage. Trump himself cited the DPA in a 2017 letter determining that "technology items affecting aerospace structures and fibers, radiation-hardened microelectronics, radiation test and qualification facilities, and satellite components and assemblies are critical to national defense."  

The U.S. healthcare system is currently facing potential shortages of critical supplies, including hand sanitizer and N95 surgical masks. 

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

3M Company Stock Quote
3M Company
$129.77 (-0.43%) $0.56
Medtronic plc Stock Quote
Medtronic plc
$90.42 (1.37%) $1.22
Becton, Dickinson and Company Stock Quote
Becton, Dickinson and Company
$249.34 (1.97%) $4.81
Verizon Communications Inc. Stock Quote
Verizon Communications Inc.
$50.94 (0.95%) $0.48
AT&T Inc. Stock Quote
AT&T Inc.
$20.95 (1.65%) $0.34

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/30/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.