Federal contracts should now include clauses denouncing DEI practices
US President Donald Trump has ordered executive departments and agencies to cancel contracts with businesses that engage in diversity, equity, and inclusion (DEI) programs, in his latest bid to stamp out what he dubbed as "unethical" activities.
Trump, in a new executive order, directed that federal contracts should have new clauses stating that contractors will not engage in any "racially discriminatory" DEI activities.
The agreements should also state that contractors will be willing to submit information and reports, and provide access to records, to demonstrate compliance with the order.
Contracting agencies have the authority to cancel, terminate, or suspend contracts, as well as suspend or debar contractors, if they fail to comply with the new requirements, according to the order.
Trump's DEI crackdown
Trump's new directive comes as he pointed out that some companies continue to discreetly engage with DEI measures despite his government's major crackdown on the practice.
DEI activities create "unnecessary costs" by limiting organisations to hiring or promoting certain individuals, suppliers, or intermediaries based on their race or ethnicity, according to Trump.
"These costs are inevitably passed on to the Federal Government when it contracts with companies who engage in racially discriminatory DEI activities, or who use subcontractors who do so," he said in the executive order.
"It is therefore the policy of the United States to promote economy and efficiency in Federal contracting by preventing racial discrimination."
This is Trump's latest measure to crack down on DEI activities. In January 2025, the US president directed federal agencies to terminate DEI mandates, policies, programmes, preferences, and activities.
"DEI activities are not only unethical and often illegal, but also cause inefficiencies, waste, and abuse within entities that engage in such practices," Trump said.
"Specifically, DEI activities impose artificial costs in hiring, promotion, and operations by precluding implementation of merit-based principles; creating excessive workforce turnover by elevating immutable characteristics over job performance; and jeopardising the sort of employee collaboration and problem-solving that is essential to fostering efficient and high-quality work."
Corporate America has been seeing a massive withdrawal of DEI policies over the past few years amid opposition from Trump and conservative backlash. Major firms such as McDonald's, Walmart, Toyota, Harley-Davidson, among others, have scaled back their DEI policies.
