White House at odds over trade war with China

The US-China trade war has lasted nearly half a year and is becoming increasingly fierce. While China has yet to show clear signs of concessions, the Trump administration has begun to show cracks in its trade stance with Beijing, which could give President Xi Jinping more determination to confront the US, according toWashington Post.

The conflict in the White House between National Economic Council Director Larry Kudlow and National Trade Council Adviser Peter Navarro is said to have existed for a long time, especially the two men's opposing views on trade with China. While Kudlow wants to maintain a moderate economic relationship with Beijing, Navarro is considered a much more hawkish person who always wants to put more pressure on China.

That conflict erupted on November 13, when Kudlow publicly criticized Navarro’s recent comments on trade with China. Navarro, in a speech at the Center for Strategic and International Studies (CSIS) last weekend, accused several unnamed Americans of acting as “unpaid foreign agents” who sought to bring “the will of Goldman Sachs and Wall Street” to a deal between the two economic superpowers.

Referring to the prospect of the US and China taking steps to ease trade tensions, Navarro said that the deal must be "the will of President Donald Trump, not Wall Street," and declared that any deal involving Wall Street tycoons "smells." The US stock market, which had just risen after news that Trump and Xi would meet on the sidelines of the G-20 summit in Argentina, immediately turned red after Navarro's comments.

It is unclear who Navarro was referring to in his comments, but Washington Post reporter Michael Kranish reported in March that Blackstone Group CEO Stephen Schwazman, one of the American businessmen with the closest ties to Beijing, could be a major influence on Trump's stance on China. "Schwazman is trying to persuade Trump not to follow through on his campaign pledge to label China a currency manipulator," Kranish wrote.

In the interviewCNBCOn Tuesday, Kudlow sharply criticized Navarro's statements, saying that the adviser's warning to tycoons to stay away from US-China trade negotiations "does not represent the voice of the President or the administration."

"His comments were inaccurate and not authorized by anyone," Kudlow said. "I think what he did did a great disservice to the president."

Commentator Tory Newmyer said the spat between Kudlow and Navarro should not have occurred at a time when the Trump administration was focused on preparing for a meeting with Xi in Buenos Aires later this month. This is considered the best chance for the US and China to avoid the risk of escalating the trade war to a new level of intensity, as Trump has threatened to impose tariffs on the remaining $267 billion of Chinese goods and increase the old tax rate from 10% to 25% from January 2019.

The Trump administration appears to be trying to use the opportunity to advance trade talks with China. Treasury Secretary Steven Mnuchin spoke by phone with Chinese Vice Premier Liu He on November 9 to discuss trade. Kudlow also revealed yesterday that the Chinese and US governments are "communicating at all levels, and that's a good thing." The official said the Trump administration is preparing the necessary documents for discussions with Chinese leaders on the sidelines of the G-20 summit.

The big question for Xi and senior officials in Beijing now is what kind of deal Trump will accept to end the trade war. Beijing leaders have acknowledged that the most difficult part of their negotiations with Washington is not understanding the intentions of an unpredictable Trump, which his close aides sometimes do not understand.

However, with the public spat between Kudlow and Navarro, China may now have new clues to study its strategy to deal with Trump in the war, analysts said.

“Navarro’s speech made it clear that the United States is moving toward a deal with China,” said Fred Bergsten, director of the Peterson Institute for International Economics. “Navarro doesn’t want a deal, so he’s publicly complaining about it.”

Navarro was once the biggest inspiration for Trump's efforts to fix the trade deficit with China, but an anonymous source told CNBC yesterday that the White House is looking to reduce his role after the dispute with Kudlow. White House Chief of Staff John Kelly is also said to be looking to limit Navarro's contact with Trump.

But some experts also warn that given his unpredictable personality, Trump is unlikely to accept a trade deal with China this month and could also change his stance on Navarro's role at any time.

“The US-China negotiations are in a similar situation,” said Scott Kennedy, director of the China Political Economy and Business Project at CSIS. “The upcoming meeting between the two leaders is a huge opportunity, so there will be a lot of lobbying inside and outside the White House to propose even the smallest agreements, such as a cessation of hostilities between the two sides. The public disputes we see now are the result of that lobbying.”

Former Treasury Secretary Hank Paulson and former Secretary of State Henry Kissinger are among the campaign's leaders. Speaking in Singapore last week, Paulson, who was CEO of Goldman Sachs, said an "economic iron curtain" could divide the world if the US and China failed to resolve their differences. Kissinger warned that the conflict between the two powers could "destroy the hope for world order." Both Paulson and Kissinger have met with Chinese leaders in the past two weeks, according toWSJ.