Trump tells advisers he will not de-escalate trade war

President Donald Trump is telling advisers and close allies that he has no intention of pulling back on his escalating trade war with China, arguing that clashing with Beijing is highly popular with his political base and will help him win re-election in 2020 regardless of any immediate economic pain.

Administration officials and outside Trump advisers said Tuesday that they do not expect him to shift his position significantly in coming days, saying he is determined to endure an intensifying showdown with Chinese President Xi Jinping despite turbulence in global markets and frustration within his own party.

Trump's defiance is rooted in decades of viewing the Chinese as economic villains and driven by his desire to fulfill a core promise from his 2016 campaign: that he would dramatically overhaul the US-China relationship. The confrontation is also fueled by Trump's willingness to flout the norms of presidential behavior, including his suggestion on Tuesday that the Federal Reserve should assist his trade efforts by lowering interest rates.

"I don't see him crying uncle anytime soon," said Stephen Moore, a conservative economist who withdrew from consideration as a Trump Federal Reserve Board nominee amid an uproar. "It's a high-risk strategy, but it's not in his personality to back down. This goes back to what he said that first time he came down the escalator at Trump Tower."

Speaking to reporters Tuesday before boarding Marine One en route to Louisiana, Trump insisted that he is in a "very, very strong position" and called the stalled negotiations "a little squabble."

Trump cast the strength of the US economy as leverage, saying, "We have all the advantage." And he reiterated his threat to expand the tariffs to cover virtually all Chinese imports, saying, "We're looking at it very strongly."

But as Trump expresses confidence, there have been tensions inside the White House, with some advisers uneasy with Trump's strident nationalism and firm belief in tariffs as economic weapons. The disagreements reflect broader distress within Republican circles about the president's sharp rhetoric and refusal to budge.

"I don't like directionally where it's going," said former White House communications director Anthony Scaramucci, a prominent investor. "The economy is still very strong. It's not clear to me it will fully derail the economic story. But it could put a dent in the stock and bond market."

"Tariffs are blunt instruments. They can inflict on competitors and be a source of leverage for negotiations," said former White House staff secretary Rob Porter, who at times engaged in heated discussions with Trump on trade. "They can also have significant consequences for global supply chains and domestic producers and consumers, and any decision on tariffs should include careful consideration of all these consequences."

Trump has worked to contain his current advisers as the negotiations have unfolded and present a united front to the Chinese, who he believes are looking for weakness, according to multiple officials, many of whom spoke on the condition of anonymity to share private discussions. With Scaramucci, Porter and others who are alarmed now gone from the White House, Trump has found it easier to navigate his own administration and govern by his own instincts.

Chinese President Xi Jinping (left) greets Trump during a welcome ceremony at the Great Hall of the People in Beijing. Photo / AP

Trump was irritated on Sunday after National Economic Council Director Larry Kudlow acknowledged on "Fox News Sunday" that American consumers end up paying for the administration's tariffs on Chinese imports, contradicting Trump's claim that the Chinese foot the bill, officials said.

"Trump called Larry, and they had it out," according to one White House official who was not authorised to speak publicly. Two other officials, however, described the conversation as cordial and said Trump and Kudlow went back and forth on trade, with Trump telling Kudlow several times to "not worry about it."

Republicans close to the president have said they've come to accept the president's hard line, even if they do not share it.

"The president believes tariffs are good economic policy. They are a tool to bring about trade," said Sen. Lindsey Graham, R-S.C., a Trump confidant. "Trump has been consistent on trade for 30 years."

Graham said Trump often speaks about China in sweeping ways that underscore his unwillingness to flinch. Aides to the president say he comments about how many goods are made at low cost in China and how he believes China does not pay their workers or follow international laws. These people say he also bragged to aides about how much he has damaged the Chinese economy.

At a "Cocktails and Conversation" gathering of Republicans at the luxe 21 Club restaurant in New York City on Monday night, former Trump economic adviser Gary Cohn said he felt that the president might want to keep the debate over trade alive for the 2020 election because he believed it is a winning campaign issue, according to one attendee who was not authorised to discuss the meeting publicly.

Cohn, who has long been critical of tariffs, also worried aloud that the clash could do lasting damage to the nation's farming industries and said the Trump administration's effort to offset the effect of the trade war on US farmers by supplying subsidies for them is not a sufficient approach if markets are lost, two attendees said. Cohn compared Trump's strategy to treating cancer with a Band-Aid, they said.

Still, Cohn said, Trump could win a second term on the strength of the US economy. He added that the president could run on a "3-3-3" platform, meaning about 3 per cent for unemployment, GDP growth and wage growth, two attendees said.

The event, which included wealthy political donors and other GOP power brokers, was organised by a firm that employs former White House chief of staff Reince Priebus, who also spoke there, according to three people familiar with the gathering.

When Cohn was in the administration, he and Trump would have loud, profane fights over tariffs, and Trump would sometimes tell him to stop arguing because Cohn wasn't going to change the president's mind, according to former aides.

Trump would acknowledge in private conversations that economists broadly say tariffs cause American consumers to pay higher prices, but he would add that "you can find an economist to say anything," in the words of one former aide who discussed the issue with him.

Dozens of US companies have complained that Trump's earlier steel and aluminum tariffs drove up their costs and hurt more US workers than they helped. But Trump does not see it that way and suspects companies are trying to blame him for troubles that began before he implemented tariffs, according to people familiar with the internal debate.

Cohn says Trump could win a second term on the strength of the US economy. Photo / AP

"For right now, it's what is going to get him re-elected, because we have unemployment rates low and wages increasing," said Tom Bossert, a former Trump administration homeland security adviser. "Trump sees it as standing up for the American worker."

Some critics wonder if Trump's strategy is effective or more of an extemporaneous exercise without any clear end.

"China is a target that has to be confronted," said Sen. Angus King, a Maine independent who caucuses with Democrats. "The question is whether this shock-and-awe strategy is a strategy at all. Will stronger tariffs lead to results? I'm not sure."

Trump's influential allies in the conservative media, such as Fox Business host Lou Dobbs, have been enthusiastically encouraging the president's headstrong tactics and disparaging his business-friendly critics.

Dobbs, speaking on Monday night's broadcast with longtime Trump political adviser Corey Lewandowski, railed against Trump's opponents on trade as the "chamber of horrors" - a reference to the US Chamber of Commerce - and said he should ignore "all the Wall Street firms."

Stephen Bannon, the former White House chief strategist who once advised Trump on trade, said in an interview Tuesday that Trump's outlook on trade has not changed since they first met in 2010 at Trump Tower, and argued that it will be hard for any adviser to convince him to change.

Trump's defiance is rooted in decades of viewing the Chinese as economic villains. Photo / 123RF

"Back then, he was watching Dobbs, reading the New York Times, following everything on China," Bannon said. "It's at the core of who he is."

But there is a widening gap between Trump and congressional Republicans, who on Tuesday expressed unhappiness with the president's refusal to measurably soften his position. A number of GOP senators have called to express displeasure in recent days, people familiar with the calls say, but Trump remains determined.

"The fact is it's Americans who are paying the price of these tariffs," Sen. Patrick Toomey, R-Pa., told reporters on Tuesday, citing economic data showing the levies have not had the intended effect of closing the trade gap with China or measurably hurting Chinese exports.

Asked if Trump understands this view, Toomey said, "I assume the president understands how this works. But you'd have to ask him why he comes to the conclusions he comes to." When pressed for further explanation, he declined and said he would "leave it at that."

Vice President Mike Pence has quietly sought to allay senators concerns over tariffs but has been unable to offer any meaningful concessions or promises, Senate GOP aides said this week. During a lunch with Republicans last week, Pence told senators he heard them when they berated the administration's tariffs, but he then asked them to stand with the president, without saying much else.