Trump Asserts He Can Force U.S. Companies to Leave China

BIARRITZ, France — President Trump asserted on Saturday that he has the authority to make good on his risk to power all American companies to go away China, citing a nationwide safety regulation that has been used primarily to goal terrorists, drug traffickers and pariah states like Iran, Syria and North Korea.

As he arrived in France for the annual assembly of the Group of seven powers, Mr. Trump posted a message on Twitter citing the International Emergency Economic Powers Act of 1977, a regulation initially meant to allow a president to isolate prison regimes, not sever financial ties with a significant buying and selling companion over a tariff dispute.

“For all of the Fake News Reporters that don’t have a clue as to what the law is relative to Presidential powers, China, etc., try looking at the Emergency Economic Powers Act of 1977,” Mr. Trump wrote. “Case closed!”

The president’s risk to all however lower off one in every of America’s most necessary buying and selling relationships amid a so-far-unsuccessful commerce conflict may disrupt a world economic system already on the sting of recession whereas additional unsettling corporations within the United States that depend on China of their manufacturing of every part from clothes to smartphones.

American business leaders warned that forcing companies to leave China would hurt the competitiveness of American industry and cause heavy financial losses.

“It’s difficult to move out of China, and any time they are forced to do so by tariffs, this is a momentous act,” said Ker Gibbs, president of the American Chamber of Commerce in Shanghai. ”We are in no position to give up the China market — it’s too large, it’s too important.”

Business leaders said the result could be a flurry of fire sales at greatly reduced prices as companies from other countries snap up American business interests.

Peter Baum of Baum-Essex, a firm that makes products like umbrellas for Costco and cotton bags for Walmart, said he had already moved much of his manufacturing to factories in Vietnam and Cambodia over the last year because of Mr. Trump’s tariffs.

As the trade war shows up in American cash registers, stock markets and retirement account statements, American shoppers and retirees will grow angry, Mr. Baum said.

“Both Trump and Xi have backed themselves into such a corner that this will go on through the U.S. election,” he said. “These two guys don’t realize that this could cause a global depression, not recession.”

In raising the possibility of an American withdrawal on Friday, Mr. Trump framed it not as a request but as a dictate he had already issued.

“Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing our companies HOME and making your products in the USA,” he wrote on Twitter.

In fact, aides said, no order has been drawn up nor was it clear one would be. For the moment, they said Mr. Trump was signaling American businesses to begin to disentangle from China on their own.

Presidents invoked the law when Iraq invaded Kuwait in 1990, when Serbia sent troops into Kosovo in 1998 and when Russia annexed Crimea in 2014. Among the countries targeted have been international outliers like North Korea, Sudan, Somalia, Yemen, Syria, Congo and Venezuela.

Using it in a trade dispute with a country like China would be a drastic departure. But Mr. Trump could make the argument that China constitutes a national security threat through the theft of intellectual property or its military buildup in the South China Sea.

The Trump administration previewed this view of Beijing in its national security strategy in 2017, which described China as a “revisionist power” that has “expanded its power at the expense of the sovereignty of others.”

John E. Smith, a partner at the international law firm Morrison & Foerster, said it had never been used for pure economic warfare without a national security nexus and could be challenged in court or by Congress.

“In the 20 years I’ve been doing this, I have not seen anything where there was not a national security threat,” said Mr. Smith, who until last year was director of the Treasury Department’s Office of Foreign Assets Control, which enforces the emergency powers law. “This is a completely different use of a well-utilized tool in going after what appears to be a purely economic dispute.”

But even if an unprecedented stretch of the law, some international trade lawyers said it was written broadly enough that Mr. Trump could prevail.

“The statute gives the president the right to do just about anything if he or she first declares that here’s a national security threat to the United States,” said Judith Alison Lee, a lawyer at Gibson Dunn in Washington. “It would be hugely disruptive but, technically speaking, I think the statute gives him that authority.”

William A. Reinsch, an international business scholar at the Center for Strategic and International Studies, said that he did not think the act would allow Mr. Trump to order American companies to leave China, but that he might be able to block future investments, freeze Chinese assets and exclude Chinese financial institutions from the United States financial system.

With Congress in recess, there was scant response on Saturday to the president’s latest assertion of authority. But congressional Republicans, who consider free-market principles a defining tenet and jealously guard their jurisdiction over trade, have balked in the past at Mr. Trump’s threats to intervene in the economy.

At the same time, given years of dealing with the president’s whipsawing declarations, particularly on trade, many Republicans have concluded that there is no upside to publicly breaking with Mr. Trump, preferring instead to try to influence him privately.

Tension over the global economy was already likely to shadow Mr. Trump’s meetings with leaders in France this weekend. Donald Tusk, president of the European Union, warned Saturday against “senseless disputes” and further economic conflict.

“Trade deals and the reform of the W.T.O. are better than trade wars,” he said, referring to the World Trade Organization. “Trade wars will lead to recession, while trade deals will boost the economy.”

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