Weekly Economic Report
President Trump fired off the biggest broadside of his Presidency on Friday, but the target was not the Federal Reserve or China – it was Corporate America, or more specifically multinational corporations based in the US. He “hereby ordered” them to find alternatives to China. When called on this over-the-top directive in a capitalist state that thrives on freedom, the President pointed to his almost unlimited control under the International Emergency Economic Powers Act of 1977. While it is true the President has such power, it can only be exercised after Congress has given approval. This law is the basis for sanctions on Iran and was the driver behind the since rescinded 5% tariff on Mexico – where the President had Congressional approval to renegotiate NAFTA (an agreement, not a treaty), and it hasn’t been removed since USMCA has not yet passed. No such power exists with respect to China. Congress has gone along with the President’s tariffs, which are within his constitutional purview as are all things international. However, dictating to US companies about their behavior – even beyond US borders – requires an emergency be declared by someone and approved by both chambers of Congress and the President. There are many in the corporate world who agree with the trade war against China. There are many who want the Federal Reserve to ease monetary policy aggressively. We do not believe there are many who support a centrally planned economy with the President, regardless of party, calling the shots. Multinational businesses dismay was quickly expressed by a plethora of representative institutions, starting with the US Chamber of Commerce and Business Roundtable.