The clause seeks to ensure that only US iron, steel and manufactured goods are used in projects funded by the bill.
A European Commission spokesman said it was the "worst possible signal".
However, German Chancellor Angela Merkel said President Obama had assured her the US would not follow protectionist policies.
"He stressed that," she said.
The rescue plan has already been approved by the US House of Representatives and is under discussion in the Senate this week, who could sign it off before the weekend - BBCObama has not only been asked by Several Allies overseas to remove this clause, but many businesses here in the US want the clause removed. Conventional wisdom says that we don't want to get into a trade war with the economy the way it is now. Regardless of what the big Unions may want you to think, there is very little that is made here with all American parts. We start a trade war and you could see the American Economy come to a complete stand still.
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