The plan, as I see it, is to really fuck the west coast. I believe that the Secretary's 'sanctuary' label - which echoes Federal use of 'terrorism sponsor' label - is intended to be used politically. This is entirely a tax looting operation. Historically, Oregon and Washington have received about 80% of tax dollars back in Federal spending; that's what I mean when I say we are very large tax exporters. The goal here is to reduce that to zero, so it can all be spent on Trump supporter states. Authoritarians always loot: this is a looting operation.
It's also meant to destabilise our economy. It will affect everything - transit, infrastructure, health, education, you name it. The goal is to drive us immediately into budget crisis, which they will then blame on us in their propaganda. And let's not lie: they will succeed in causing a crisis, barring immediate (and successful) legal actions and injunctions. We have to be ready to deal with that. It will not be easy.
It is absolutely a declaration of economic war against us. Treat it as such.
(Also, I don't think the first "or" in "or which has in effect a statute, policy, or practice that prevents or hinders the enforcement of Federal law" (section 9(a)) is in the slightest bit unintentional. I think they're coming after things like legalised pot as well. If you have friends who don't care about the primary issues, hit them on that, maybe that will stick.)
Here's the relevant section:
Sec. 9. Sanctuary Jurisdictions. It is the policy of the executive branch to ensure, to the fullest extent of the law, that a State, or a political subdivision of a State, shall comply with 8 U.S.C. 1373.
(a) In furtherance of this policy, the Attorney General and the Secretary, in their discretion and to the extent consistent with law, shall ensure that jurisdictions that willfully refuse to comply with 8 U.S.C. 1373 (sanctuary jurisdictions) are not eligible to receive Federal grants, except as deemed necessary for law enforcement purposes by the Attorney General or the Secretary. The Secretary has the authority to designate, in his discretion and to the extent consistent with law, a jurisdiction as a sanctuary jurisdiction. The Attorney General shall take appropriate enforcement action against any entity that violates 8 U.S.C. 1373, or which has in effect a statute, policy, or practice that prevents or hinders the enforcement of Federal law.
(b) To better inform the public regarding the public safety threats associated with sanctuary jurisdictions, the Secretary shall utilize the Declined Detainer Outcome Report or its equivalent and, on a weekly basis, make public a comprehensive list of criminal actions committed by aliens and any jurisdiction that ignored or otherwise failed to honor any detainers with respect to such aliens.
(c) The Director of the Office of Management and Budget is directed to obtain and provide relevant and responsive information on all Federal grant money that currently is received by any sanctuary jurisdiction.
(Source for text: http://www.12news.com/news/politics/national-politics/full-text-read-trumps-presidential-executive-orders-regarding-the-border-wall-and-immigration/392606198 )
eta: Yes, the Supreme Court has ruled that only funds related to the law(s) at hand can be suspended or withheld. However, that assumes respect for law and democratic norms, neither of which are present in the Trump administration, or any part of the ~~alt-right~~ neofascist movement which backs him.