WASHINGTON: Two top White House officials said President Donald Trump has the authority to force American companies to leave China – as he claims, and which trade experts question – yet whether he invokes those powers is a another question.
Treasury Secretary Steven Mnuchin, speaking on “Fox News Sunday” from the Group of Seven meeting in Biarritz, France, said Trump would have the ability under the International Emergency Economic Powers Act, if he declared an emergency. White House economic director Larry Kudlow agreed, in an interview on CNN’s “State of the Union,” but said “there’s nothing right now in the cards” to do so.
Trump cited the 1977 measure in a tweet late Friday, saying it gave him the power and declaring, “Case closed!”
Some China hardliners in the Trump administration have been urging the president to invoke the law on a number of fronts over the past two years. Using it as a way to curb US investment into China would be extreme, though, and take aim at operations of American businesses ranging from automakers General Motors Co and Tesla Inc, to industrial companies such as Caterpillar Inc and retail giants including Walmart Inc.
Experts say applying the law, known as IEEPA, in this fashion was never the intent of the legislation, but it wouldn’t be the first time the administration has looked into it. Trump cited the power when he threatened in May to place levies on Mexican goods as a way to force curbs on the flow of undocumented immigrants across the US-Mexican border.
The intensifying trade battle between the world’s two largest economies, and the potential for Trump to push the limits of presidential authority, has roiled markets. The Dow Jones Industrial Average fell 623 points, or 2.4%, on Friday, trimming its 2019 gains to below 10%, and pushing it lower on a year-over-year basis.
US equity futures tumbled while the yen and Treasury contracts climbed in Asia on Monday morning. The yuan weakened and stocks looked headed for steep losses in Asia.
Mnuchin and Kudlow fielded questions Sunday after a series of tweets from Trump on Friday, in which he “hereby ordered” American companies to seek alternatives to business in China, including moving operations “home and making your products in the USA.”
The president’s comments were followed hours later by tweets declaring that the U.S. would increase the rate of existing and impending tariffs on Chinese goods. Trump’s moves were in response to an earlier announcement Friday that China was planning to impose tariffs on US$75 billion of US imports.
Trump’s warning on Twitter Friday reflected the possibility of a long trade war, Mnuchin said.
“What he was saying is he’s ordering companies to start looking, because he wants to make sure to the extent we are in an extended trade war that companies don’t have these issues and move out of China,” he said.
Kudlow echoed the point, while emphasizing that the president wasn’t currently making an order.
“There’s no emergency powers being invoked right now,” Kudlow said.
“Ultimately, we do have such authority, but it is not going to be exercised presently. What he is suggesting to American businesses – and it’s something he has said to many companies, in many different forms, on many different occasions – you ought to think about – to the companies – you ought to think about moving your operations and your supply chains away from China.”
While at the G-7 meeting in France, Trump also answered questions about his reasoning around IEEPA, and why it would be appropriate to invoke it.
“In many ways it’s an emergency. I have no plan right now,” the president said.
“Actually we’re getting along very well with China right now. We’re talking. I think they want to make a deal much more than I do.”
Trade experts have questioned Trump’s authority to impose tariffs under IEEPA. The act’s been used primarily to sanction countries in national security threats, such as Iran during the hostage crisis in 1979-1981. It would allow Trump to bypass Congress to “investigate, regulate or prohibit” everything from foreign-exchange transactions to transfers of credit, and freeze assets.
Trump would have to first declare an emergency to invoke IEEPA. Some legal experts said he likely has the authority to do so given the administration’s repeated efforts to highlight China’s theft of intellectual property and other trade and security concerns.
“I’m not saying it’s an easy case to make, but I don’t think it’s laughable,” said Raj Bhala, a specialist in international trade law at the University of Kansas School of Law.
If Trump did invoke IEEPA, he would have to craft a remedy that’s proportional to the threat, Bhala said. Thus, a complete ban on doing business in China probably wouldn’t stand, but restrictions on companies dealing with sensitive intellectual property might, he said.
Any such effort would be litigated, and while there’s disagreement about what IEEPA permits, it probably allows Trump to block imports or exports, freeze Chinese assets, and exclude Chinese institutions from the US financial system, said Bill Reinsch of the Center for Strategic and International Studies in Washington.
“It is not what Congress intended, but that does not necessarily mean he wouldn’t be able to do it,” Reinsch said.
Bhala said legal challenges probably wouldn’t have great odds for success, given the deference courts have given to a president’s authority on national security matters.
The Information Technology Industry Council, which represents companies such as Amazon.com Inc and Facebook Inc, responded Saturday with alarm.
“Like tariffs, using emergency national security powers to compel US companies to exit China would continue to create economic uncertainty, raise costs for consumers, and chill the business environment in the United States,” ITIC’s chief executive officer Jason Oxman said.
Tariffs and the uncertainty around Trump’s trade policies has already slowed business investment, muddled supply chains and weighed on the US manufacturing sector. Federal Reserve officials explained repeatedly at last week’s gathering in Jackson Hole, Wyoming, that trade disputes are poisoning the global economy and making it difficult for the central bank to keep the economy humming.
In Trump’s announcement Friday of another wave of higher tariffs, he said existing 25% tariffs on some US$250 billion in imports from China would rise to 30% come Oct 1, the 70th anniversary of the founding of the People’s Republic of China. Planned 10% tariffs on a further US$300 billion in Chinese goods will be taxed at 15% instead of 10% starting with the first tranche on Sept 1.
China is “seriously making” preparations for relations with the US to deteriorate, according to Global Times’ editor-in-chief Hu Xijin. The Global Times is a Chinese tabloid run by the People’s Daily, which is the flagship newspaper of the Communist Party.
Hu has said the paper voices opinions that official sources can’t.