Trump's 'America first' policies face their strongest test yet

Key Points
  • President Donald Trump faces growing challenges to his "America first" foreign policy doctrine.
  • His escalating trade war with China caused global stocks to slide Tuesday, erasing the year's gains in a key market index.
  • Meanwhile, Washington remains engulfed in debate over the Trump administration "zero tolerance" immigration policy, which is opposed by an overwhelming majority of independent voters.
President Donald Trump raises his fist to the crowds during the 58th U.S. Presidential Inauguration after he was sworn in as the 45th President of the United States of America in Washington, USA on January 20, 2017.
Samuel Corum | Anadolu Agency | Getty Images

President Donald Trump's "America first" doctrine faces perhaps the greatest challenge of his presidency, as negative reactions to two signature policies threaten to upend his party's prospects as it heads into the midterms.

Trump's escalating trade war with China caused global stocks to slide Tuesday, erasing the year's gains in a key market index. Meanwhile, the outcry over his administration's "zero tolerance" policy that is separating migrant children from their families at the U.S.-Mexico border has reached a fever pitch.

Tariff trouble

On Friday, Trump said his administration was moving forward with tariffs on $50 billion in Chinese goods, provoking Beijing to announce equivalent tariffs on American products, including agricultural goods. Trump then raised the stakes, threatening tariffs on more than $200 billion of Chinese goods Monday night, setting the stage for Tuesday's stock market slide.

The president had repeatedly cited the Dow Jones Industrial Average, which tracks thirty of America's largest companies, as an example of his economic policy success while that average was rising last year. As of Tuesday afternoon, the average was down slightly year-to-date.

A trade war with China is expected to disproportionately harm Trump voters in America's agricultural heartland. Iowa, which went for Trump in 2016 and historically holds the first contest in America's presidential election, could lose more than $600 million as a result of China's retaliatory tariffs on American soybeans, according to an article that ran on the front page of the Des Moines Register Saturday.

Soybean futures prices fell Tuesday, hitting their lowest level in almost a decade after the president threatened additional tariffs. Corn, produced in Trump-leaning states like Iowa and Nebraska, also plunged, falling to its lowest price in more than six months.

Political scientists have found that economic conditions are an influential factor in presidential contests. A majority of Americans oppose Trump's steel and aluminum tariffs, including a plurality of independents, recent polls have shown.

Zero tolerance policy

The president's "zero tolerance" immigration policy also threatens to alienate constituencies that could be key to Republican success in 2018, as well as the president's chances for re-election in 2020.

Most Americans, including 68 percent of independents, are opposed to the policy of separating migrant families at the border, according to a poll released Monday. Independents could be central to deciding the midterm race this fall.

Trump has blamed Democrats for the policy, but even members of his own party have acknowledged that the claim is unfounded.

"The zero tolerance policy can be changed by a phone call," Sen. Lindsey Graham, R-S.C., told reporters on Tuesday.

Sen. Orrin Hatch, R-UT, called the policy "not American," and said the the White House could stop it. Other Republican senators, including John McCain, R-Ariz., Lisa Murkowski, R-AK, and Ben Sasse, R-NE, are among those that called on the administration to end the policy.

In fact, on Tuesday, Senate Majority Leader Mitch McConnell told reporters that he and "all of the members of the Republican conference support a plan" to keep families together and end the White House practice.

Despite the push back from large swaths of the population, some analysts question whether Trump could be punished at the ballot box for either policy, saying Trump voters have known all along what the president promised.

"That his Justice Department is separating children from their parents who are crossing the border illegally should not be all that surprising," Amy Walter, a political analyst and the national editor of The Cook Political Report wrote. "As a candidate, Trump told NBC's Chuck Todd that he would order the U.S. government to deport all immigrants who are in the country illegally."

Walter cited polling which shows that more than fifty percent of Trump supporters cited "getting things done," "keeping promises," or "putting America first" as their top reason for their support.

Negotiating tactic

Some have said Trump's immigration and trade policies are negotiating tactics, initial salvos launched in anticipation of reaching a more acceptable compromise, and therefore unlikely to remain in the news as the midterm race heats up.

"What most people don't get is that it's a negotiating position and it's working," a former White House aide told CNBC about the Trump administration's "zero tolerance" immigration policy. "Immigration is more seriously on the table in Congress than it's been at any point in his presidency," he said.

Many investors used to believe that Trump's tariff threats were a negotiating tactic, according to Tom Block, a Washington policy analyst for Fundstrat who advises wealthy clients on how White House policy may affect their investments. Block said that belief was changing.

"There's so much smoke, that there's a concern that maybe there's a little fire here," Block said.