When US Commander-in-Chief Donald Trump ordered his corporate battalions to cease dealing with China, it was far more theatre than the theatre of war.

Such an edict did have an immediate impact, but perhaps not the way the President intended.

His frontline troops on Wall Street ran for the bomb shelter, jettisoning around $US670 billion ($1 trillion) from the S&P500 on the way out the door.

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That's not to say Mr Trump doesn't have options if his orders are not obeyed.

He has one very big option — trade's nuclear option — at his fingertips.

National emergency declaration

The International Emergency Economic Power Act (IEEPA) is effectively a declaration of a "state of national emergency" — a drastic action far in excess of the tit-for-tat tariff skirmishes currently being fought.

It is the Trump Administration's most extreme trade weapon and could effectively block China's access to all US markets if deployed.

That means not just blocking goods and services, it would target Chinese investments and likely slam the door on China's access to US financial markets and banks.

The IEEPA was drawn up in 1977 to modernise the Trading with the Enemy Act, which dated back to World War I, and focus it on external threats to the US.

It was last invoked by President George W Bush after the 9/11 attacks to block the assets of terrorist organisations.

Earlier this year, President Trump announced he'd wheel out the IEEPA powers to hit Mexico with tariffs to head off the perceived national security threat posed by illegal immigrants continuing to head north across the border.

Now China is in the IEEPA crosshairs as Mr Trump tweeted to doubters of his powers.

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Extraordinary powers

Earlier this month, Mr Trump made it clear he was thinking of something big when asked about China's threat of retaliation to the new batch of 10 per cent tariffs which are set to be imposed from September.

"If they did [retaliate], we have the ultimate form of retaliation," Mr Trump said. "I think that they'd have very few jobs left in China, because we'd be able to step it up."

Invoking the IEEPA doesn't require the consent of Congress.

According to big US investment bank Citi, all Mr Trump needs to do is declare a national emergency with respect to an extraordinary threat to the US national security, foreign policy or economy.

"IEEPA gives extraordinary powers to the President," Citi wrote in a note to its clients as tensions ratcheted up after the latest barrage of Trump tweets.

"IEEPA allows the President to investigate/regulate/prohibit any foreign exchange/financial/trade transactions, and to block during investigation/regulate/prohibit/nullify any use of rights/power or acquisition/holdings/trade of any property subject to US jurisdiction," Citi's global economics team wrote.

It also doesn't operate with the usual checks and balances of the US legal code.

Once invoked, US Treasury can block assets without proving any wrongdoing, nor can the target of the action appeal against the decision through the courts.

Comprehensive is certainly one word for it.

Congress would only have a say if it could muster a two-thirds majority to override a presidential veto, otherwise the state of emergency could stay in place for 12 months before it automatically expires.

Other weapons

There are still some smaller ordnance at the President's disposal before he goes nuclear on trade.

There's the push to declare China a "currency manipulator," which is likely to lead to more tariffs if it is argued the yuan's devaluation is being used as a countervailing subsidy for Chinese exports.

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The Tariff Act of 1930 allows the President to jack all the current tariffs up to 50 per cent if the US finds China has discriminated against US businesses.

This is the case currently being marshalled by the US Commerce department against China's intellectual property (IP) practices.

Citi says if the alleged discrimination was not removed, this could be the first step down the road to blocking, rather than just taxing, imports from China.

"An announcement on these lines could thus put US firms on notice so that their supply chains are effectively switched away from China," Citi said.

There are other, less drastic, tactics at the President's disposal.

Carpet-bombing the Federal Reserve and its Chair Jerome Powell with tweets, trying to drive down the US dollar and drive up US export competitiveness, is a relentless, and so far largely ineffective, campaign.

Is peace possible?

Invoking the IEEPA could be counterproductive in the President's efforts to drive down interest rates and borrowing costs.

As Citi points out, foreign investors and investment funds have a statistically meaningful impact on keeping downward pressure on auction yields of long-term US Treasuries.

"As such, if Chinese purchases are taxed, all else equal, it could reduce the downward pressure on auction yields and translate into higher debt financing costs.

"In addition, there could be an additional reaction in financial markets once participants become aware that China is not present at a US Treasury auction."

Something approaching a deal is possible if Mr Trump senses his re-election chances are being damaged by the odds of a recession shortening or if Wall Street becomes completely panic-struck.

Just at the moment, the US-China trade conflict looks like getting far more intense before a detente is considered.

"Just so you understand, I've been very mild about it. Very, very mild. There's a long way I can go," Mr Trump warned.

The conventional trade war is already having a crushing impact on global trade, manufacturing and agriculture.

The "nuclear" option would cause immeasurably more damage.