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Trump Aides Say He Isn't Ordering U.S. Companies Out of China

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08/25/2019 | 04:29pm EDT

By Jessica Donati

WASHINGTON -- President Trump didn't order U.S. companies to leave China and has no plans to invoke emergency powers to force them to relocate their operations, top administration officials said on Sunday, after a tumultuous week for trade negotiations.

The remarks followed Mr. Trump's tweet on Friday that said American companies were "hereby ordered" to start looking for an alternative to China after Beijing announced new levies on U.S. imports. Stocks tumbled on Friday in response to the news.

The president's top economic adviser, Lawrence Kudlow, told CNN's State of the Union on Sunday that Mr. Trump didn't intend to issue an order.

"What he is suggesting to American businesses," Mr. Kudlow said, is that "you ought to think about moving your operations and your supply chains away from China and secondly, we'd like you to come back home."

Mr. Kudlow mentioned the U.S. corporate tax rate, which was cut under legislation passed in 2017, and the Trump administration's "massive deregulation program" as reasons for businesses to relocate.

Treasury Secretary Steven Mnuchin also weighed in, telling Fox News Sunday that the president didn't have plans to invoke emergency powers to force U.S. companies out of China.

"I think what he was saying is he's ordering companies to start looking, " Mr. Mnuchin said. "He wants to make sure to the extent that we are in an extended trade war, that companies don't have these issues and move out of China."

Both Messrs. Mnuchin and Kudlow said that the president could theoretically force U.S. companies to leave China by invoking a law known as the International Emergency Economic Power Act (IEEPA) of 1977.

Mr. Kudlow also said Mr. Trump's tweeted announcement Friday that he would raise the rate on existing and planned tariffs on Chinese goods by 5 percentage points remained in place. Tariffs in place on about $250 billion of Chinese goods will rise to 30% on Oct. 1. Tariffs planned to take effect Sept. 1 and Dec. 15 on a further roughly $300 billion will rise to 15%, officials have said.

Stocks enter the final week of August coming off one of their rockiest stretches of 2019, after the S&P 500's 2.6% drop Friday, the latest example of trade-related volatility that has rattled investors and confounded central bankers.

According to the Congressional Research Service, IEEPA can be used to deal with "any unusual and extraordinary threat" outside the U.S. "to the national security foreign policy or economy of the United States, if the President declares a national emergency with respect to such threat."

Mr. Trump hasn't declared a national emergency regarding the matter.

The president is required "in every possible instance" to consult with Congress before exercising authorities granted by IEEPA, and to specify in a report to lawmakers why the circumstances constitute a threat and why the actions are necessary, CRS said in a briefing paper on the law issued earlier this year. The president must submit follow-up reports every six months.

Congress can retroactively approve unilateral presidential invocations of the law, according to CRS.

Its first use was in response to the taking of U.S. Embassy staff as hostages by Iran in 1979, according to the CRS. That emergency has been ongoing for five decades.

As of March 1 of this year, presidents had invoked the act 54 times since it was passed into law, and 29 of these were ongoing at that time. Cuba, North Korea and Venezuela are among the targets.

China hasn't previously been targeted under IEEPA, but in 1950, President Truman imposed economic sanctions on North Korea and China under the Trading with the Enemy Act. IEEPA branched out of that act, in an effort to place limits on a president's emergency powers.

Joshua Bolten, president and CEO of the Business Roundtable, a group of large-company CEOs, said on Sunday that business supports challenging China on its trade practices, but warned that Mr. Trump could wreak havoc by taking things too far.

"He has a lot of authority through the national security statutes to disrupt trade and commerce in a way that would cause huge damage not just to the Chinese economy but to the global economy and the U.S. economy," said Mr. Bolten, who previously served as President George W. Bush's chief of staff.

And he warned that many companies have been pushed to the brink.

"A lot of American businesses now have their foot poised above, right on top of the brake, and they're tapping the brake periodically."

--Richard Rubin contributed to this article.

Write to Jessica Donati at jessica.donati@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
DJ INDUSTRIAL -0.59% 26935.07 Delayed Quote.16.15%
NASDAQ 100 -0.99% 7823.553294 Delayed Quote.24.63%
NASDAQ COMP. -0.80% 8117.674437 Delayed Quote.23.37%
S&P 500 -0.49% 2992.07 Delayed Quote.19.36%
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