Trump's tariff approach will have 'a very harmful effect' on US consumers: Former Bush aide

  • Strategist Sara Fagen thinks targeted approach to tariffs is better than a broad one that "very well may be hurting our economy."
  • She thinks Trump is fundamentally right that China has been "ripping off our technology for years."
  • However, the administration's approach is having a very harmful effect on American consumers, she says.

President Donald Trump is tackling tariffs the wrong way, Sara Fagen, a former senior aide to President George W. Bush, told CNBC on Thursday.

The president is fundamentally right that China has been "ripping off our technology for years," as well as making it difficult for technology companies and movie studios to operate in the country, she said.

However, "the way that the White House is going about this is having a very harmful effect on American consumers," Fagen said on "Power Lunch," noting that prices are rising on such items as washers and dryers.

President Donald Trump holds a rally with supporters in Duluth, Minnesota, June 20, 2018.
Jonathan Ernst | Reuters
President Donald Trump holds a rally with supporters in Duluth, Minnesota, June 20, 2018.

Trade tensions have been escalating between the United States and the rest of the world.

The latest move came on Monday, when Trump directed the U.S. trade representative to identify $200 billion worth of Chinese goods for additional tariffs at a rate of 10 percent. China promised to retaliate.

But the president is not just focusing on China. The Trump administration recently imposed tariffs on steel and aluminum imports from Canada, Mexico and the European Union.

"This is hurting everybody," said Fagen, who also served as White House political director in President George W. Bush's administration.

She'd prefer a targeted approach instead of doing it on a broad scale that "very well may be hurting our economy."

James Pethokoukis, economic policy analyst at the conservative American Enterprise Institute, agrees broad tariffs that effect "everybody whether they play by the rules or not" are not the way to go.

"What the United States should be doing is going after companies that have stolen intellectual property, that have forced other U.S. companies to give them their technology," he told "Power Lunch."

That can be accomplished by not letting U.S. companies sell the offending companies things they need or by denying those companies access to the U.S. markets, explained Pethokoukis, a CNBC contributor.

Commerce Secretary Wilbur Ross told CNBC earlier Thursday that rising trade tensions between the U.S. and the rest of the world will help lower trade barriers for American companies.

"The ultimate objective of the president is to reduce tariffs, reduce trade barriers and make an open level playing field for U.S. companies all around the world, whether it's in China or anywhere else. That is the end game that we are seeking," he said on "Squawk Box." "In order to get there, we've had to do some other measures."

Fagen says if the administration sticks with its current tactics ultimately the president will feel the pain.

"This is going to hurt politically for the president when Americans start to see their 401(k)s drop because we start to see sustained stock market drops and companies that are heavily reliant on trade harmed. I suspect that is going to happen if we get into a full-blown trade war," said Fagen, a CNBC contributor.

"There's a chance to walk it back, but it's just tough."

— CNBC's Tae Kim contributed to this report.