Conservative Koch brothers network breaks with Trump over brewing trade war with China

Key Points
  • The Koch network backed by conservative billionaires Charles and David Koch opposes tariffs.
  • "Our view is we are hopeful the administration will reverse course on these policies because tariffs ultimately hurt more jobs then save and hurt the very people they intend to help," said a spokesman for one of the groups in the network.
  • The Koch groups are worried that tariffs and a trade war with China would offset any potential positive economic gains from the Republican tax cuts.
Charles and David Koch
Miller Hawkins | MSNBC

President Donald Trump is so far unwilling to back down from a trade war with China, but that may change as pressure mounts from the influential political and donor network backed by the conservative billionaire Koch brothers.

Executives at Americans for Prosperity, just one part of the ever-growing Koch influence empire, said that tariffs will only hurt American consumers and possibly cancel out positive effects from the Republican tax cut bill passed in December.

"From the beginning we've said that tariffs and protectionism is a bad idea," Tim Phillips, president of Americans for Prosperity, said in an interview Friday. "It's a tax on American consumers because a lot of the product they're buying will cost more and it hurts American industries when countries retaliate."

The group has also expressed its concerns directly with the White House.

Charles and , the leaders of Koch Industries, one of the largest private corporations in the world, exert vast political power and influence on the right for an array of pet conservative issues, such as tax cuts.

Jan Kniffen says with tariffs in place consumer may have to pay more for goods
Jan Kniffen says with tariffs in place consumer may have to pay more for goods

The political wing of the Koch network was one of the most vocal supporters of the tax reform bill Trump signed last year. The group pushed the message that changes to the tax code will lead to economic growth across the country.

On Friday, with the president ratcheting up his trade rhetoric, Americans for Prosperity continued to make the case for the GOP tax cuts. In a recent article titled "5 Things to Look Forward to Under the New Tax Code," the group promoted the notion that the reduced corporate tax rate — which was cut from 35 percent to 21 percent in the tax bill — will not only lead to strong growth, but more investments in the United States.

However, there is concern within Koch-backed groups that the ripple effects from a trade war could cancel out tax reform wins.

"We think when you look at tariffs this is a significant threat that can undermine tax reform and increase costs for people who are only just starting to feel the relief," Americans for Prosperity's top spokesman, Bill Riggs, told CNBC.

The group has privately spoken with the White House about the tariffs. So far, the two sides have failed to see eye to eye on the administration's trade policies.

"It's been an ongoing conversation. We have a good line of communication with the White House's economic policy team. They've explained their reasoning behind it and we just strongly disagree," said Phillips, the Americans for Prosperity president.

Potential conflict for the congressional GOP

With the network taking a stand against the president's efforts to slap tariffs on Chinese imports, Republican leaders in Congress who reaped Koch funds last year could be forced to go after Trump.

House Speaker Paul Ryan, R-Wis., for instance, was one of the top recipients of Koch financial contributions in 2017. His campaign committee, Team Ryan, brought in $495,000 in November from the coffers of Charles Koch and his wife, Elizabeth, during the same month the House of Representatives passed its historic tax reform bill, according to Federal Election Commission filings.

Ryan criticized the president in March when the administration proposed tariffs of 25 percent on steel and 10 percent on aluminum imports. "I disagree with this action and fear its unintended consequences," Ryan said at the time.

Watch Charles Koch's opening remarks at his private donor retreat in Palm Springs
Watch Charles Koch's opening remarks at his private donor retreat in Palm Springs

In a statement provided to CNBC, Ryan's spokeswoman, AshLee Strong, said Friday that the speaker still intends to work with the administration on future trade initiatives and is hoping for a different approach.

"We continue to work directly with the White House to find a better, more targeted approach," Strong said.

The Kochs also gave more than $406,000 last year to the National Republican Congressional Committee, the campaign fundraising arm for Republicans trying to get elected to the House. They gave a similar amount to the National Republican Senatorial Committee, which is dedicated to maintaining a GOP majority in the Senate.

David Koch made his fair share of political investments in 2017, as well, shelling out $100,000 to the joint fundraising committee for Sen. Orrin Hatch, R-Utah, among others.

The NRCC declined to comment while the NRSC and a spokesman Hatch did not immediately return CNBC's requests for comment.

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