Inside The White House's Bitter Fight Over China

May 7, 2019
Originally published on May 14, 2019 1:54 pm

President Trump escalated the trade fight with China this week, saying he will steeply increase tariffs on Chinese products this Friday.

But while the White House projects a unified front in favor of wielding tariffs as a weapon against China, it wasn't always this way.

Early in Trump's presidency, close advisers fought bitterly over whether tariffs would help — or devastate — the U.S. economy, those advisers told NPR and the PBS show Frontline.

"If you take all the other nastiness on the things like the Paris accord and the [Trans-Pacific Partnership agreement] ... roll it up and put it to the factor of 10, they don't compare to these weekly nasty trade meetings," said Steve Bannon, Trump's former chief strategist.

"These arguments would get quite personal," Bannon added.

And the disagreements weren't just behind closed doors.

"They were having fights in front of the Chinese delegation, which is like a cardinal sin of negotiating," says Susan Thornton, former acting assistant secretary of state for East Asian and Pacific affairs.

As for the president, he has long railed against China and its trade relationship with the United States, calling the U.S.-China trade deficit "the greatest theft in the history of the world." On the campaign trail, he frequently offered tariffs as a way to rebalance trade with China and revive American manufacturing jobs.

"We can't continue to allow China to rape our country, and that's what they're doing," Trump said in one typical speech before an energized crowd at a 2016 campaign rally in Indiana.

Bannon says the message connected viscerally with Trump's core supporters.

During a campaign stop in Fort Wayne, Ind., on May 1, 2016, Trump, then the Republican presidential candidate, criticized U.S. relations with China, saying the United States "can't continue to allow China to rape our country."
Darron Cummings / AP

"You could tell in sitting in the audience when he started talking about trade, when he started talking about China, these working-class people would lean forward," Bannon says. "No other Republican talked like this."

Still, when Trump was elected, he assembled a team of advisers who were not always in agreement about how to confront China. And the group quickly splintered, deadlocked over whether tariffs would bring China to heel — or send the world's two largest economies into turmoil.

In one camp, which came to be called the nationalists, were pro-tariff advisers like Bannon and Peter Navarro, a hawkish economist. Opposing them were the globalists, including economic adviser Gary Cohn and Army Lt. Gen. H.R. McMaster, then Trump's national security adviser.

"We agreed on what the fundamental issue was," says Cohn, former president and chief operating officer of Goldman Sachs. "We agreed that the forced technology transfer, the lack of market access, the copyright infringements was all a huge problem. What I think we had different methodologies on is how we were going to solve that problem."

Gary Cohn, then director of the National Economic Council, listens during a Feb. 13, 2018, meeting between President Trump and members of Congress to discuss trade.
Alex Wong / Getty Images

Cohn believed that heavy tariffs would hurt the U.S. — that they would make the Chinese products that Americans buy more expensive and that business growth would slow as a result. He and other globalists wanted to partner with other countries to confront China with powerful alliances.

Bannon and Navarro wanted to use tariffs to force China to the table and end long-standing issues of intellectual property theft and unfair practices. They believed higher prices on Chinese goods would protect U.S. jobs and bring back manufacturing.

Bannon says there was no room for compromise.

"A couple of times we had blowups. I mean, there was a blowup in the Oval Office," he says. "[Navarro] pulls out one of his charts, which the president loves. The next thing you know, we had this big blowup. We had to exit and go back into the Roosevelt Room."

Cohn accused the nationalists of using glossy charts and pictures to make their case with the president, instead of using actual data.

Steve Bannon, then President Trump's chief strategist, listens as Trump speaks on April 20, 2017, before signing a memorandum on the investigation of steel imports.
Mark Wilson / Getty Images

"From time to time, there were people that tried to use unfootnoted, undocumented facts," Cohn says. "It's my job to get rid of the undocumented, unfootnoted facts and make sure that those don't enter the Oval Office."

Navarro declined NPR and Frontline's request for an interview.

McMaster says everyone in the room was concerned from the beginning about the economic threat China posed.

"The president's eyes were wide open and so were all the members of his cabinet," McMaster says.

But some of the disagreements are still raw. When told what McMaster said about Trump's advisers being clear minded on China, Bannon responded, "That is a total and complete lie."

"I fought that guy every day," Bannon says of McMaster. "I don't want to hear his nonsense now that he realizes he was on the wrong side of history."

Navarro, director of the Office of Trade and Manufacturing Policy, presents charts showing job numbers to Trump on Jan. 31, 2019.
Mark Wilson / Getty Images

By the end of 2017, when Trump and his team had begun trade negotiations with their Chinese counterparts, the discord was seeping well outside the White House.

Thornton, who has served under 10 secretaries of state, says trying to present a strong, unified front to the Chinese when White House advisers were fighting internally — and externally — was one of the hardest assignments of her career.

"It makes it look like your delegation doesn't know what it's doing and that the leader doesn't have sufficient authority to negotiate. But that was happening," Thornton says. "You can't have this team that's fighting with itself. That's a big disadvantage."

Bannon says it doesn't matter if the Chinese knew top officials weren't on the same page. He intended to win.

"We came loaded," he says. "The most intense fights and debates in the White House, OK, were about this issue of tariffs, but tariffs as a proxy to the great economic war with China that we were engaged in."

Navarro, Commerce Secretary Wilbur Ross, U.S. Trade Representative Robert Lighthizer, Treasury Secretary Steven Mnuchin and other Trump administration officials sit down with Chinese senior officials for trade negotiations at the Eisenhower Executive Office Building on Jan. 30, 2019.
Chip Somodevilla / Getty Images

For Bannon and the other nationalists, the effort paid off. In March 2018, Trump announced tariffs on steel and aluminum, and six months later he imposed additional tariffs on $200 billion in Chinese goods.

Cohn accepted defeat.

"Did I feel like I had represented the nontariff side of the equation for many people in the White House that didn't want tariffs?" he asked. "I did. I felt like I had done everything I can. It's no different than if you play a sport and you lose a game. If you left it all out on the field, you feel OK. I felt like I had given it my best effort."

But he says the White House globalists aren't the only ones who lost.

"Who I think lost was the United States consumer," he says. "Someone's paying the tariff. Whoever's paying the tariff is the loser. For every dollar of tariff that's collected, it's coming out of disposable income of the United States consumer today."

Trump and Chinese President Xi Jinping walk together after their meetings at Mar-a-Lago on April 7, 2017, in Palm Beach, Fla.
Alex Brandon / AP

Cohn left the White House less than a week after the steel tariffs were announced. In the weeks and months that followed, McMaster left his job, and Thornton left her post at the State Department. Bannon had already resigned in 2017, after clashing with other members of Trump's team.

Economists say it's too soon to know the tariffs' impact. So far, the trade deficit with China has only grown. But Bannon says he and other like-minded nationalists were always thinking beyond mere economic indicators.

"I think ultimate success is regime change [in China], and I realize in that regard I'm considered a radical," Bannon says. "I think the goal into China is quite simply ... to break the back of this totalitarian mercantilist economic society."

Copyright 2019 NPR. To see more, visit https://www.npr.org.

RACHEL MARTIN, HOST:

It is not exactly set to be a warm welcome. Chinese trade negotiators come to Washington for trade talks tomorrow - this even as President Trump says he's ready to raise tariffs on $200 billion worth of Chinese imports. U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steve Mnuchin confirmed that those tariffs will take effect this Friday if the Chinese backtrack from trade commitments.

Although the White House appears to be a united front in this moment, NPR and the PBS show "Frontline" found that top administration officials spent more than a year deeply divided on this issue. Top advisers fought bitterly over whether tariffs would help the U.S. economy or devastate it. Here's NPR's Laura Sullivan.

LAURA SULLIVAN, BYLINE: Steve Bannon, President Trump's former chief strategist, first met the president in 2010.

STEVE BANNON: Well, I get invited up to a meeting by a guy named Dave Bossie. He says Donald Trump wants to meet and talk about running for president. And I said, of what country?

SULLIVAN: But a few days later, Bannon went and found he and Trump had something important in common - a shared belief that China posed a grave danger to the United States.

BANNON: Now, he didn't know a lot of details. He knew almost no policy. But what I found most extraordinary was when we got to the section on China - which I kind of threw out there - of a two-hour meeting, almost 30 minutes or more was all about China.

SULLIVAN: Trump has railed against China and the U.S. trade deficit for more than two decades. In television interviews, he said tariffs would revive manufacturing jobs. By the time he hit the campaign trail, Trump had found his audience.

(SOUNDBITE OF ARCHIVED RECORDING)

PRESIDENT DONALD TRUMP: We can't continue to allow China to rape our country, and that's what they're doing.

SULLIVAN: Bannon watched from the back.

BANNON: When he started talking about trade and he started talking about China, these working-class people would lean forward. No other Republican talked like this.

SULLIVAN: When Trump was elected, he assembled a team of advisers to focus on China, pulling in people like Gary Cohn from Goldman Sachs, a hawkish economist named Peter Navarro; his U.S. trade representative, Robert Lighthizer; an Army general, H.R. McMaster, who became his national security adviser. But this group of advisers quickly splintered, deadlocked over whether tariffs would bring China to heel or send the world's two largest economies into turmoil. They broke into two camps, the globalists versus the nationalists. Gary Cohn was Trump's top economic adviser.

GARY COHN: We agreed on what the fundamental issue was. We agreed that the forced technology transfer, the lack of market access, the copyright infringements was all a huge problem. What I think we had different methodologies on is how we were going to solve that problem.

SULLIVAN: Cohn was a globalist. He and others, like H.R. McMaster, believed heavy tariffs would hurt the country, that the Chinese products Americans buy will become more expensive. Business growth would slow. They wanted to partner with other countries to confront China with powerful alliances. Nationalists like Steve Bannon and Peter Navarro, the economist, wanted to use tariffs to force China to the table to end longstanding issues of theft and unfair practices. They believed higher prices on Chinese goods would protect U.S. jobs and bring back manufacturing. Bannon says there was little middle ground.

BANNON: If you take all the other nastiness on the things like the Paris accord and TPP, roll it up and put it to the factor of 10, they don't compare to these weekly nasty trade meetings. I mean, there was a blowup in the Oval Office. Peter pulls out one of his charts, which the president loves. Next thing you know, we have this big blowup. We have to exit and go back into the Roosevelt Room.

SULLIVAN: Gary Cohn remembers it well. He says Bannon and Navarro were not bringing actual data to the meetings.

COHN: From time to time, there were people that tried to use unfootnoted, undocumented facts.

SULLIVAN: Cohn says there were a lot of pictures and infographics, whiteboards with giant pie charts.

COHN: It's my job to get rid of the undocumented, unfootnoted facts and make sure that those don't enter the Oval Office.

SULLIVAN: Are you talking about Peter Navarro's charts?

COHN: Yes, I'm talking about Peter Navarro's charts.

SULLIVAN: Navarro declined NPR's request for an interview. H.R. McMaster said everyone in the room was concerned from the beginning about the economic threat China posed. But tension between the two men is clearly still high.

HR MCMASTER: The president's eyes were wide open and so were all the members of his Cabinet.

SULLIVAN: All of you universally felt that China was a threat and a problem.

MCMASTER: That's correct.

BANNON: That's a total and complete lie.

SULLIVAN: Bannon says he and McMaster were never on the same page.

BANNON: I fought that guy every day. I don't want to hear his nonsense now that he realizes he was on the wrong side of the history. If he said that, he is a stone cold liar.

SULLIVAN: By the end of 2017, the discord was seeping well outside the White House. Susan Thornton was acting assistant secretary of state for East Asian and Pacific affairs and has served under 10 secretaries. She said it was one of the most difficult assignments of her career, trying to present a strong unified front to the Chinese.

SUSAN THORNTON: You can't have this team that's fighting with itself. That's a big disadvantage for us, frankly.

SULLIVAN: Do you think China was aware that there were different sides arguing different...

THORNTON: Oh, yes. They were having fights in front of the Chinese delegation, which is, like, the cardinal sin of negotiating. It makes it look like your delegation doesn't know what it's doing and that the leader of the delegation doesn't have sufficient authority to negotiate.

SULLIVAN: Bannon says it doesn't matter if the Chinese knew top officials were at odds. He intended to win.

BANNON: We came loaded. The most intense fights and debates in the White House were about this issue of tariffs but tariffs as a proxy to the great economic war with China that we're engaged in.

SULLIVAN: For Bannon, Navarro and the nationalists, it paid off. In March 2018, Trump called steel and aluminum executives from around the country to the White House.

(SOUNDBITE OF ARCHIVED RECORDING)

TRUMP: Thank you very much, everyone. We have with us the biggest steel companies in the United States...

SULLIVAN: He announced tariffs on steel and aluminum and, six months later, imposed additional tariffs on 200 billion in Chinese goods. Cohn accepted defeat.

COHN: Did I feel like I had represented the nontariff side of the equation for many people in the White House that didn't want tariffs? Well, I did. I felt like I had given it my best effort.

SULLIVAN: But he says the White House globalists aren't the only ones who lost.

COHN: Who I think lost was the United States consumer. Someone's paying the tariff. Whoever's paying the tariff is the loser. For every dollar of tariff gets collected, it's coming out of disposable income of the United States consumer today.

SULLIVAN: Cohn left the White House less than a week after the steel meeting. And in the weeks and months that followed, H.R. McMaster left his job, Susan Thornton left her post at the State Department and Steve Bannon had already resigned. But the administration is forging ahead with the nationalist agenda. Economists say it's too soon to know the impact of the tariffs, but they haven't lowered the trade deficit as Trump wanted. In March, the deficit with China was at a record high. Bannon says those are narrow outcomes. He and the other nationalists are thinking bigger.

BANNON: I think the goal into China is quite simply to break the back of this totalitarian mercantilist economic society. So it's definitely us versus them, and I don't think there's any doubt about that.

SULLIVAN: Cohn says that goal could turn an economic problem into something even more serious.

COHN: China is a superpower. China has 1.4 billion people. That's a fact. If we really become isolationist and China becomes isolationist, that seems to me like you're trying to set up a conflict.

SULLIVAN: Trade talks are expected to continue this week. Laura Sullivan, NPR News.

MARTIN: And "Frontline's" full investigation with NPR "Trump's Trade War" airs tonight on your local PBS station. Transcript provided by NPR, Copyright NPR.