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Mike Pompeo risks alienating free trade supporters like the Koch network as he pushes Trump's hard-line trade agenda against China

Key Points
  • Since becoming secretary of State, Mike Pompeo has embraced President Donald Trump's protectionist trade stances, particularly when it comes to China.
  • Yet while he is pushing the president's agenda, Pompeo is risking his long-standing alliance with free-trade groups like the Koch network, which backed him during his political rise.
  • And that could put a dent in any plans Pompeo might make to run for office after his days in the Trump administration.
U.S. Secretary of State, Mike Pompeo, speaks at a news conference while U.S. President Donald Trump looks on following his second summit meeting with North Korean leader Kim Jong-un on February 28, 2019 in Hanoi, Vietnam.
Tuan Mark | Getty Images

Since becoming secretary of State, Mike Pompeo has embraced President Donald Trump's protectionist trade stances, particularly when it comes to China.

Yet while he is pushing the president's agenda, Pompeo is risking his long-standing alliance with free-trade groups like the Koch network, which backed him during his political rise as a Republican former congressman from Kansas.

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Why the Koch brothers are at odds with President Trump

That could put a dent in any plans Pompeo might make to run for office after his days in the Trump administration.

"Pompeo is traditionally a Koch-backed free trader. Since joining the administration, [Pompeo] has layered 'America First' on top of that to assist Trump's efforts to level the playing field with China," said Dan Eberhart, a leading Republican donor who has attended Koch seminars. "The Kochs have a litmus test so this might foreclose the door on them helping him."

Bill Riggs, a spokesman for the Koch network, said "our focus is really on policy," when asked about Pompeo's role in supporting the trade war, which the group opposes. "We support the administration's stated and ultimate goal of zero tariffs and zero barriers, but more tariffs are the wrong way to get there."

Pompeo's support for Trump's tariffs could be treacherous in the secretary of State's home state of the traditionally GOP-friendly Kansas, where the trade war has weighed on the economy. While Pompeo has said the administration's policies would benefit Kansas' workers in the longer term, the state's farmers, especially those who grow soybeans, haven taken a hit.

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Watch CNBC's full interview with U.S. Secretary of State Mike Pompeo

Wichita, which is located in the congressional district Pompeo used to represent, suffered more from the trade fight than any other U.S. city, according to a Brookings Institution study last summer. Wichita also happens to be the headquarters of Koch Industries, the Koch brothers' multinational chemical and energy company.

Republicans had mixed success in typically GOP-friendly Kansas during last year's midterms. Kris Kobach, a staunch Trump supporter, lost the governor's race to Democrat Laura Kelly. In Pompeo's old 4th District, Republican Ron Estes kept the seat in GOP hands. The Koch Industries PAC contributed $15,000 to Estes' campaign, but the broader Koch political network did not get involved with the race, according to the nonpartisan Center for Responsive Politics.

It's not yet clear what Pompeo intends to do after his tenure in Trump's Cabinet. He recently ruled out running for Kansas GOP Sen. Pat Roberts' seat next year after a nudge from Senate Majority Leader Mitch McConnell.

A State Department spokeswoman referred CNBC to Pompeo's recent interviews on CBS and Fox News, where he touted Trump's trade policies — while ripping Democratic presidential contender Joe Biden's claim that China is not a competitor with the United States.

"Maybe when he ran for president the first time, this was the situation, but it's certainly not today," Pompeo said on Fox News Sunday, referring to Biden. "China poses an enormous challenge to the United States of America. I agree with him; ultimately, America will prevail. I'm confident of that."

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A White House spokesman referred CNBC back to the State Department.

During his three terms in Congress before becoming Trump's CIA director in 2017, Pompeo voted in support of various pieces of free-trade legislation, including the Free Trade Agreement with Korea and the Trade Promotion Agreement with Colombia and Panama.

He has received routine financial support from the Kochs, their political organization and their conglomerate, Koch Industries. The company and the Koch-backed political action committee donated a combined $400,000 to Pompeo's campaigns while he was running in the 4th Congressional District, according to the nonpartisan Center for Responsive Politics. Charles Koch, a financier of the network, regularly contributed personally to Pompeo's campaign. In 2014, the Koch-backed Americans for Prosperity spent at least $413,000 in support of Pompeo's successful reelection campaign.

The Koch political operation has vocally opposed the president's trade war with China.

"I've heard his [Trump's] advisors say, 'Well it [tariffs] gives them leverage in these trade discussions over other countries,'" said Tim Phillips, head of Americans for Prosperity. "Well it's important to note that it's leverage on the backs of American consumers and on the backs of American businesses that have to pay for these things."

The network has followed through with its criticism on Trump's tariffs on Chinese goods with television, digital and radio campaigns. The president, however, has shrugged off any opposition to his protectionist strategy. On Sunday, he threatened to raise tariffs on $200 billion on Chinese goods to 25 percent from 10 percent, despite administration officials repeatedly saying that talks between the two countries were going well.

One of Pompeo's corporate supporters, General Mills, has likely taken a hit from the trade war. The company's PAC spent $10,000 on Pompeo's 2016 reelection campaign.

Food companies have boosted prices to offset higher production costs stemming from tariffs. In March, General Mills announced it was raising prices on some of its cereals and snacks, citing more expensive ingredients and higher shipping costs.

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"We are seeing an unprecedented rise in logistics costs," CEO Jeff Harmening said in an interview with The Wall Street Journal. General Mills spent $110,000 on lobbying "issues related to Section 232 Investigations into steel and aluminum," among other trade policy concerns, according to the company's 2019 first quarter disclosure report.

A spokesman for General Mills did not return repeated requests for comment.

Pompeo also had indirect business ties to China prior to his time in Congress.

Just days before Pompeo's secretary of State confirmation hearing in the Senate Foreign Relations Committee, McClatchy reported that in the lead-up to his taking over the CIA, he failed to disclose that he once owned a Kansas-based business that imported oilfield equipment from a company owned by the Chinese government.

The Heritage Foundation, an influential conservative think tank, has also supported Pompeo in the past, but its views on trade have diverged under the Trump administration. For instance, one recent article produced by the group was headlined: "Trump's trade war is causing long-term damage."

Still, the organization held off on trashing Trump and Pompeo when asked specifically about the secretary of State's altered position on trade.

"Regardless of who occupies the White House, the solution to protectionism is not more protectionism, which ultimately results in higher costs for the American people," said Heritage policy analyst Riley Walters. "The White House should remove these punitive tariffs directed at China."