(Recasts with Cohn's departure raising risks of trade war, addsrising China trade threat)
By Susan Cornwell and Jeff Mason
WASHINGTON, March 6 (Reuters) - Economic nationalistsappeared to gain the upper hand in a White House battle overtrade with the resignation Donald Trump's top economic adviser,Gary Cohn, on Tuesday in a move that could ramp up protectionistmeasures that risk igniting a global trade war. Cohn did not spell out the reasons for his resignation. Hehad told Trump that markets would slump on a tariffs threat andwas regarded as a bulwark of economic orthodoxy in anadministration whose protectionist policies have sparked alarmamong U.S. legislators and in governments around the world. resignation came after Trump said he was stickingwith plans to impose hefty tariffs on steel and aluminumimports. While the measures on their own are relatively small,the risk is that an emboldened Trump administration will pushahead with a full-scale economic confrontation with China.
America's trade deficit with China hit $375.2 billion in2017, equivalent to two-thirds of the country's total tradedeficit of $566 billion. Trump has said he will remedy what heterms the jobs- and industry-destroying deficits.
"The economic nationalists now certainly have the upper handand their camp is bigger. I think they are going to be veryinfluential in the administration,” said Monica de Bolle, asenior fellow at the Peterson Institute for InternationalEconomics, a Washington-based think tank.
The Trump administration has launched an investigation intointellectual property abuses by China, which could dwarf anyimpact of the steel and aluminum proposals and trigger a sharpresponse from Beijing. Trump has said the fines could be huge.
With Cohn's departure, the profile of Peter Navarro, ananti-China economist who favors protectionist measures, appearsto have risen within the White House.
Navarro has written extensively of China's military andeconomic threat to the United States in a series of books,including "Death by China: Confronting the Dragon — A GlobalCall to Action."
He has heavily backed the steel and aluminum tariffs inrecent days.
TRUMP PUSHES AHEAD
Despite a rising tide of criticism from Republican lawmakersabout the proposed 25 percent tariff on steel imports and 10percent on aluminum imports, Trump on Tuesday reiterated hisplan for the tariffs.
Given the size of America's trade deficit, Trump said thecountry would not be a loser in any fight.
"When we're behind on every single country, trade warsaren't so bad," he said at a news conference at the White Housewith the Swedish prime minister.
House of Representatives Speaker Paul Ryan, a prominentRepublican critic of the tariffs proposal, returned to theattack on Tuesday, saying the proposed duties were too broad.Although the measure is designed to hit China, its main impactwill be on U.S. allies like Canada.
Canada is the largest supplier of both steel and aluminum tothe United States.
Ryan, whose home state of Wisconsin could be hit by proposedcounter-tariffs from the European Union, has called for "moresurgical and more targeted measures." White House has said the measures will protectindustries and jobs from unfair competition and that across-the-board tariffs are needed because countries like China use thirdcountries for shipping steel to the United States, disguisingthe origin.
Opponents charge that the tariffs could destroy more jobsthan they create as well as risking alienating U.S. allies,while American consumers will end up paying more for a range ofproducts from cans of beer to cars.
"There is a lot of concern among Republican senators thatthis could sort of metastasize into sort of a larger trade war,and many of our members are discussing with the administrationjust how broad, how sweeping this might be," Senate majorityleader Mitch McConnell said in his first comments on the issue. NEEDED IN CHINA FIGHT
Even before Trump announced the tariffs, the United Stateswas mired in lengthy talks to renegotiate the North AmericanFree Trade agreement with Canada and Mexico, two of Washington'sclosest allies, to win better terms.
Six months on, the talks are stalled. The steel and aluminumtariffs risks adding the European Union to the list ofdisgruntled allies.
China's economy has grown too large for the United States totake it on completely alone and trade experts said it would needfriends in any fight. China is now deeply integrated into globalsupply chains and is home to many of the world's globalcompanies.
Prior to Trump's tariff action, cross-country discussionshad produced plans to pressure China over steel, an issue thataffects the European Union as well as the United States.
China has stayed mum so far over the proposed tariffs,although it has threatened to cut U.S. agricultural imports ifit is hit. The risk of a trade war with China - especially ifsevere sanctions are imposed over intellectual property issues -would escalate sharply.
"I think the chances of us having a trade war have nowincreased significantly," the Peterson Institute's de Bollesaid.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^UPDATE 1-Trump sticks with tariff plan, warns EU on trade