Trump's China gamble: Betting his political future and the country's economy

WASHINGTON — President Donald Trump's trade war with China has him putting targets on the backs of iconic heartland companies with deep ties to his most loyal voters.

"(T)he Tariffs can be...completely avoided if you buy from a non-Tariffed Country, or you buy the product inside the USA (the best idea)," Trump wrote in a series of tweets Monday. "That's Zero Tariffs. Many Tariffed companies will be leaving China for Vietnam and other such countries in Asia. That's why China wants to make a deal so badly!"

The set of companies those recommendations apply to include such all-American brands as Ford, John Deere and Caterpillar.

That's how badly Trump has twisted himself around the axle of a trade war with China, and it carries risks for both his policy aims and his re-election campaign. Rather than seeing a caution flag in his party's loss of House seats in the 2018 midterms — many of them in districts deeply affected by his trade agenda — Trump has hit the gas.

The gamble is that he can bring China to its knees before economic pain devastates his political coalition. He comes to the fight with strong ratings on the economy, an electorate that is mistrustful of both China and trade, and a political base that is so deeply loyal it has been willing, so far, to endure the bruises in service of his overall goals.

But there's concern, even in GOP circles, that the dam may not hold forever.

"Republicans are shaking in their boots at the short-term cost of this trade war no matter how much longer term sense it makes," said Dan Eberhart, a major Republican donor and the CEO of Canary, a drilling services company.

"Trump is willing to risk the growing economy to realign trade with China," he said, adding that he's had to raise his prices 11 percent to compensate for a 15 percent increase in costs from the tariffs. "No modern president has had the strength of stomach to risk economic growth to call China out."

But as he and some other Republicans acknowledge, there is significant short-term pain for U.S. companies and consumers — and China's system may be "better built to withstand the short-term pain to get the victory."

It's not an entirely partisan issue. Many Democrats, conscious of trade wariness on the left, have been critical of China and supportive of the president's overall efforts to press Beijing.

"Hang tough on China, President @realDonaldTrump," Senate Minority Leader Chuck Schumer, D-N.Y., tweeted earlier this month — before the latest round of tariffs. "Don't back down. Strength is the only way to win with China."

Some of the folks hit hardest are the rural voters in Trump country who have to pay more for items like farm equipment even as Chinese markets for their products are closing.

The latest escalation amounts to increased U.S. duties on $200 billion of Chinese goods and higher Chinese tariffs on $60 billion of American products, which appeared to be the driver behind a 700-point drop in the Dow Jones Industrial Average of top stocks by Monday afternoon.

Trump has touted both the health of the stock market and rising gross domestic product growth during his administration as reasons voters should re-elect him. But both could be imperiled by an extended battle with Beijing, according to Phillip Braun, associate chair of the Finance Department at Northwestern University's Kellogg School of Management.

"The U.S. stock market is taking China’s retaliatory tariffs to heart," Braun said. "The declines in the U.S. markets indicate the market is predicting the negotiations between the U.S. and China will not be resolved quickly, leading to slower U.S. economic growth."

Already, many U.S. companies have passed new tariff-related costs on to consumers, and Trump has been forced to create a taxpayer-financed bailout fund for farmers to help offset the pain of the trade war.

Larry Kudlow, director of the White House's National Economic Council, admitted during an interview with Fox's Chris Wallace on Sunday that American consumers end up paying the premium for tariffs rather than China, as Trump has said repeatedly.

The big political questions are whether and when all of it will reach a tipping point with Trump voters.

Chris Wilson, a veteran Republican strategist and pollster who worked on Sen. Ted Cruz's presidential campaign in 2016, said there's no reason for Trump to worry now about the political effects of the criticism he's getting for his aggressive tack with China.

"Like so many things Trump does, his rhetoric and approach is not typical for Washington and makes a lot of people who have made careers on these issues blanch. But so far he is getting results — as long as the economy continues to hum along, he is on solid ground politically," Wilson said.

"More than half — 56 percent — say he's doing a good job on the economy," he added. "So while there may be pain, the perception is things are good and voters see that they are better off today than they were four years ago under (President Barack Obama and Vice President Joe Biden)."

But Democrats believe further pain could hurt Trump's re-election chances.

"I certainly think it's turning on him," said Troy Price, chairman of the Democratic Party in Iowa, where Democrats flipped two GOP-held seats in November. "The trade war is really being carried on the back of people here in Iowa. ... This is going to be a major issue as we head into 2020."

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