China trade debate roils Trump team: Navarro vs. Mnuchin

Trump administration trade representative Peter Navarro's role in trade talks with Beijing officials Thursday remains unclear after he accused Treasury Secretary Steve Mnuchin of highjacking the negotiations, steering it away from President Trump’s stated get-tough goals with China and all but forcing the president to agree to bail out controversial Chinese telecom giant ZTE, the Fox Business Network has learned.

Details of Navarro’s contretemps with Mnuchin that began earlier in the month during trade negotiations in Beijing have not been reported. But they add a new twist to a simmering White House feud over trade as the talks move to Washington with meetings scheduled for Thursday between U.S. officials and China's Vice Premier Liu He.

Amid the continuing negotiations the White House is seemingly at war with itself over how to deal with China on this key issue; nationalists like Navarro are pushing for punitive measures against Chinese abuses while free traders like Mnuchin are looking to avoid a major economic confrontation.

The president, who ran during the 2016 campaign as a nationalist on trade, is said to welcome the infighting as a way to produce policy even if leads to messy confrontations among senior advisers, people close to the White House tell Fox Business.

It's unclear if he will intervene in the dispute between Navarro and Mnuchin, or whether Navarro, an academic who has written extensively about the Chinese trade threat, will remain in the administration if he continues to be relegated to a lesser role, these people add.

Earlier Thursday, the White House told Fox Business that Navarro would participate in the meetings.

As of midmorning, Navarro had been given no official word from the White House on his involvement in the meetings; he still was not listed as a major participant on the official program of the meeting, which will be headlined by Mnuchin, U.S. Trade Representative Robert Lighthizer and Commerce Secretary Wilbur Ross, these people add.

However, late Thursday morning Larry Kudlow, who runs the president's National Economic Council, said Navarro certainly will be in the negotiations.

"He's going to be involved," Kudlow said. "He's a member of our team in good standing. He's a smart guy."

Navarrro is said to be somewhat befuddled that he is listed to attend a state dinner tonight with Chinese officials but not the trade meetings and that the way he discovered his involvement has been through press accounts.

Navarro declined to comment; a spokesman for Mnuchin couldn’t be reached for comment.

Even if Navarro plays a significant role in the trade talks, that will do little to tamp down his feud with the so-called free-trade globalist wing of the White House, led by Mnuchin, for whom he has a great animus. Adding to Navarro’s anger at Mnuchin has been the administration’s new policy toward Chinese telecom maker ZTE, which announced it was closing down major operations amid U.S. sanctions.

But over the weekend, Trump tweeted he had instructed Treasury Secretary Wilbur Ross to find a way to reverse sanctions to save ZTE and nearly 75,000 Chinese jobs that will be lost if it closes shop.

ZTE has long been a target of nationalists inside the Trump administration for allegedly violating various trade policies, and its announced closure came after the Commerce Department announced sanctions against the outfit.

Nationalists like Navarro believe the experience of ZTE gave leverage to the president during trade talks, underscoring how much Chinese companies need access to U.S. markets and parts.

Then on Sunday Trump tweeted: “Too many jobs in China lost. Commerce Department has been instructed to get it done!”

The apparent about-face angered Navarro, according to people with direct knowledge of the matter. He blamed Mnuchin for what one White House office described as “backing the president into a corner” on the ZTE issue.

Navarro believed Mnuchin sold the president on the idea that saving ZTE would endear him to Chinese President Xi and convince the Chinese to open markets to U.S. industry as the negotiations progress.

Navarro has told people he believed the move weakened the U.S. hand in the talks, these people add.

Navarro’s anger came on the heels of his earlier confrontation with Mnuchin when both were in China for the trade talks earlier this month.

At the time, he blamed Mnuchin for highjacking the talks and privately negotiating with Chinese officials, even keeping Kudlow out of key discussions.

One issue that led to the confrontation: Sources close to Navarro say the trade adviser was angered because Mnuchin put him and Kudlow in a "holding room."

Mnuchin was conducting private conversations with Chinese trade reps, while Navarro said he was "being spied on by Chinese agents,” these sources say.

Then, after word of Navarro’s anger over ZTE began to circulate, Mnuchin moved to exclude Navarro from the trade talks on Thursday, people close to Navarro tell Fox Business.

“I’m not invited,” Navarro said to one person with direct knowledge of the matter Wednesday night.

Navarro then told people that Mnuchin or his advisers on Wednesday began a series of coordinated leaks to get out in front of the story that the president’s trade adviser was ousted from the upcoming meetings.

The stories questioned both Navarro’s ability to remain a team player during the talks as well as his demeanor.

In an attempt to contain the bad publicity, the White House said late Wednesday and early Thursday that Navarro would "participate" in the trade talks, though it's unclear if that means he will be a significant part of the meetings, as was originally envisioned.

People familiar with Mnuchin’s thinking say he believes Navarro’s unyielding position to get tough on China could derail the talks, which come at a crucial time. For his part, Navarro believes he's been downgraded.

The administration and Chinese officials have been engaging in a war of words over trade, threatening punitive sanctions and tariffs against each other that could stifle economic growth and have rattled the stock market.

Still, the sidelining of Navarro is striking for the so-called nationalist wing in the White House. These advisers increasingly believe Trump -- through Mnuchin -- is about to craft a deal with China that doesn’t deal with the country’s threat to the U.S. in trade — namely, the theft of intellectual property that American companies experience when trying to do business in China, and the overall closed nature of Chinese markets compared to the more unfettered access Chinese industries have when dealing with the U.S.

Meanwhile, the president is scheduled to meet with North Korean dictator Kim Jong Un, who has recently threatened to pull out of the talks that were initially designed to remove the country’s nuclear weapons in exchange for economic benefits and the lifting of sanctions. The meeting is scheduled for June 12, and Beijing is seen as a key intermediary in the talks, given its historically close relationship with Pyongyang.

China’s influence has become even more important after Kim recently threatened to cancel the summit if North Korea will be forced to give up all its nukes.