SCOTT SIMON, HOST:
President Trump's trade war with China took quite a turn this week. The president announced on Twitter that he is ordering U.S. companies to find alternative suppliers outside of China. He can suggest they do that. He cannot, of course, order it. And his angry tweet sparked another sharp sell-off on Wall Street. The Dow Jones Industrial Average lost more than 600 points or 2 and a third percent. The S&P 500 fell for the fourth week in a row. And after the market closed, Mr. Trump announced he's ratcheting up tariffs.
NPR's chief economic correspondent Scott Horsley joins us. Scott, thanks for being with us.
SCOTT HORSLEY, BYLINE: Good to be with you.
SIMON: What seemed to set off the tweet storm from the president?
HORSLEY: China announced early yesterday that it is slapping tariffs on more U.S. exports - some $75 billion worth, including automobiles. So that was another escalation in the trade war. But to be clear, China was reacting to the president's tariffs which Trump had announced earlier this month. This is not the first time the administration has launched a protectionist volley and then seemed both surprised and hurt when a trading partner, like China, pushes back.
That's when Trump angrily tweeted, our great American companies are hereby ordered to immediately start looking for an alternative to China. And it was about that time that the stock market went off the edge.
SIMON: And just to repeat, the president can't order a company to do anything like that, right?
HORSLEY: I think you would search long and hard in Article II of the Constitution to find any authority for the president to dictate private supply chains. Now, overnight, President Trump was tweeting about the authority he has under the Emergency Economic Powers Act. And that authority is pretty sweeping, but it's also subject to congressional review. So that could be an interesting test.
James Pethokoukis, who's an economic analyst at the conservative American Enterprise Institute, says the kind of order that the president issued yesterday is unusual coming from the leader of a party that bills itself as the champions of capitalism.
JAMES PETHOKOUKIS: You know, there's been a lot of debate about socialism where Republicans have been accusing Democrats of being socialists. But a president of the United States presuming to order the American private sector to leave one country, go to another country - it's what you would expect to see in a command-and-control economy. And this really has nothing to do with capitalism or free market economics.
SIMON: And, Scott, the president also took on the Federal Reserve Chairman Powell. Not the first time he's done so. Tell us about their differences.
HORSLEY: This is becoming a very routine thing. Jerome Powell has tried hard not to get into a war of words with the president, but the insults have been flying in one direction. Powell was at a conference of central bankers in Wyoming yesterday, and he said the Fed is facing some unusual challenges because of all the uncertainty surrounding trade policy.
And last night, the White House added to that uncertainty. The president announced that he's raising the tariff rates on Chinese imports. Tariffs that were 10% are going to go to 15. Those that were 25% are going to go to 30. And that news came after the market closed. Had it come earlier, the sell-off on Wall Street might have been even worse.
SIMON: And, of course, this comes after a week of mixed signals - I think it's fair to say - from the White House on the strength of the U.S. economy and how they might respond.
HORSLEY: Yeah, the White House messaging has been all over the map. They've said the economy's great; they've said the economy needs an emergency rescue. They've said they're considering a tax cut; they've said a tax cut's off the table. Pethokoukis says there's very little in the last week that suggests any kind of long-term strategy from this White House.
PETHOKOUKIS: A lot of the president's supporters, you know, they kind of think this is all strategic chaos. The president knows what he's doing; he's keeping his enemies off balance. Well, he's not supposed to be keeping investors and consumers and business off balance. I mean, that's us.
HORSLEY: With signs the U.S. economy is slowing down, the president and his economic team are really being tested for the first time in the 2 1/2 years that Donald Trump's been in office. And so far, the markets are not terribly impressed with the way the White House has been handling this stress test.
SIMON: NPR's Scott Horsley, thanks so much for being with us.
HORSLEY: You're welcome. Transcript provided by NPR, Copyright NPR.