In a Friday night tweet, President Donald Trump defended a series of tweets ordering US companies to leave China and produce their products in the US instead. Experts pointed out that no US president could order companies to leave a country, but shortly before midnight Trump argued that the International Economic Power Law justifies such an order:
For all fake news reporters who have none To see what the law is about the powers of the President, China, etc., see the Emergency Economic Powers Act, 1977. Case Completed!
̵1; Donald J. Trump (@realDonaldTrump) August 24, 2019
The President is not correct in this statement. The Economic Powers Act allows the President of the United States to regulate trade in a national emergency. However, a president is not allowed to order companies to close their factories abroad. As no national emergency has yet been declared with regard to Chinese trade, Trump's current ability to regulate economic interactions with China is limited to measures such as tariffs.
Trump's original "order" came shortly after China announced its intention to respond to rising US tariffs on Chinese goods by introducing new tariffs of 5 to 10 percent on US $ 75 billion. In response, Trump accused China of stealing US intellectual property and ordered US companies to "seek immediately for an alternative to China, including transferring their businesses home and manufacturing their products in the US."
Unfortunately, our country has lost trillions of dollars over many years with China. They have stolen our intellectual property at a rate of hundreds of billions of dollars a year and want to keep going. I will not allow that! We do not need China and we would honestly be far away ….
– Donald J. Trump (@realDonaldTrump) 23rd August 2019
…. better off without her. The enormous sums that China has earned and stolen from the US for decades every year are bound to cease. Our large American companies are hereby instructed to seek out an alternative to China immediately, including ..
– Donald J. Trump (@realDonaldTrump) August 23, 2019
…. your company HOME and make your products in the USA. I will respond to China's tariffs this afternoon. This is a great opportunity for the United States. I also order all forwarders, including FedEx, Amazon, UPS, and the Post, to search for & REFUSE.
– Donald J. Trump (@realDonaldTrump) August 23, 2019  …. all supplies of Fentanyl from China (or elsewhere!). Fentanyl kills 100,000 Americans annually. President Xi said it would stop – it did not. Our economy has been MUCH bigger than China's in the last two and a half years because of our growth. We will continue like this!
– Donald J. Trump (@realDonaldTrump) August 23, 2019
After these tweets, which used the language of a formal decree, many analysts strongly stated that a US President lacks the power to issue a to make such a statement. Trump was also ridiculed for the tweets by many of his prominent critics. That's why Trump cited the Economic Powers Act.
While Trump is unable to require companies to move to their designated locations under this law, presidents can freely set their tariffs, and on Friday night, Trump targeted retaliatory measures against China for his own, including an increase in current duties on imports of $ 250 billion to 30 percent and the increase of a separate duty on goods worth $ 300 billion.
This back and forth is the latest in a trade war between the two countries stretching for more than a year. As Li Zhou of Vox reported:
Friday's announcement builds on several earlier pay rounds Trump had previously set. Last fall, the US imposed a 10 percent tariff on US $ 200 billion for Chinese imports, with a focus on products sold primarily to businesses. Last May, the administration raised this tax to 25 percent. (These are the goods that are now taxed at 30 percent.) Trump also set another 10 percent tariff, which is set to come into effect on September 1 for $ 300 billion worth of Chinese goods. This tax is expected to affect more consumer goods. (These goods are now taxed at 15 percent.)
China's new action and Trump's "command" triggered a strong stock market reaction: The Dow lost more than 600 points on Friday before announcing its latest tariffs.
Brinksmanship between the two countries leads to fears of a new US recession and economic slowdown in China, as Jen Kirby of Vox has reported. And the tariffs are ultimately paid by consumers, which Trump has routinely downplayed (though he recently announced that he would postpone tariffs on consumer goods to help Christmas buyers). The trade talks are scheduled to resume in September, although no date has yet been set.
The powers conferred on the President by the International Law on Economic Emergency Powers
President Trump did not cite for the first time on Friday the International Law on Economic Emergency Powers – called IEEPA for short – in support of his trade policy. In May, he argued that the law gave him the power to levy charges on Mexican imports through border controls during his dispute with that nation.
Generally speaking, IEEPA allows a US president to declare a national emergency and use that context to regulate trade more tightly than the separation of powers normally allows, as long as the economic action involved involves interactions with nations or people are connected to the state of emergency.
Congress may vote to end the state of emergency, but the President may reject such a vote. Without a veto-safe majority in Congress, this president could use this instrument to take a series of economic measures against countries he deals with, from Mexico to China. It also offers every president a relatively free hand in developing economic policy with nations that have long been hostile to the US. For example, since the hostage crisis of 1979, there has been a state of emergency against Iran that has allowed executive agencies to impose sanctions on Iran and individual Iranians in recent decades.
Trump is not the first president to seek this to derive new benefits from the powers granted by law. As Elizabeth Goitein, the co-director of the Freedom and National Security Program of the Brennan Center for Justice, tweeted in May, the presidents used the powers of IEEPA more than any other emergency power .
However, while the law was used to justify sanctions against foreign governments, political and terrorist organizations and occasionally even individuals, Trump is the first president to use IEEPA to justify the introduction of tariffs, according to Goitein.
If he were to declare an emergency to limit economic interaction with China, Trump would still not have the authority to withdraw existing investments from China, said Jennifer Hillman, an expert on US trade policy and professor of Georgetown law, Washington Post Office . However, it could prevent future US funds from being transferred there and create conditions that would make it so difficult to do business with China that companies are urged to relocate.
Such measures would undoubtedly have a negative impact on the bottom lines of these US companies as they would be forced to invest in machinery, supply chain services and training. However, given the availability of low-cost labor pools in other parts of the world, they are unlikely to resume manufacturing in the US. instead, they could move to countries in Southeast Asia or Africa.
All of this means that Trump, no matter what he does, is unlikely to succeed in pulling US companies home] certainly leading to further escalation in his ongoing trade war.