Cohn, who heads the National Economic Council, had reportedly threatened to leave after Trump’s incendiary comments following the deadly race riot in Charlottesville, Virginia.
But his decision to quit on Tuesday night comes after Trump’s decision to impose tariffs on steel and aluminum imports, a move he and the treasury secretary, Steven Mnuchin, have reportedly vehemently opposed.
Futures trading pointed to a sharp 1.3% drop in shares on Wall Street when business starts again on Wednesday morning and investors take in the departure of the pro-free trade adviser.
The dollar dropped 0.6% against the yen in the Asian markets session but recovered the lost ground as the day progressed.
Shares in Asia Pacific also dipped at the opening of trade on Wednesday. In Japan, where the steel industry could be badly hit by tariffs, the Nikkei was off 0.7% but also clawed back losses to sit 0.2% down at midday. In Sydney the ASX200 benchmark was down 0.8%.
In a statement given to the New York Times, which first broke the story, Trump said: “Gary has been my chief economic adviser and did a superb job in driving our agenda, helping to deliver historic tax cuts and reforms and unleashing the American economy once again. He is a rare talent, and I thank him for his dedicated service to the American people.”
Later on Tuesday, the president tweeted his intention to appoint a replacement soon, adding: “Many people wanting the job - will choose wisely!”
Cohn said in a statement issued by the White House that it had been “an honor to serve my country and enact pro-growth economic policies to benefit the American people, in particular the passage of historic tax reform”.
Cohn’s departure represents another blow to the administration, which has suffered several high-profile resignations since the election. Hope Hicks, Trump’s close aide and communications director, quit last week, and other senior figures to have left include Trump’s former chief of staff, Reince Priebus, and former chief strategist, Steve Bannon.
But the resignation of Cohn, a former chief operating officer at Goldman Sachs, could be the most consequential. It comes after global markets were roiled by Trump’s decision to press on with plans to impose tariffs on trading allies, which investors fear could spark an international trade war.
Reports that Cohn, a Democrat, might depart after Charlottesville last August also caused stock markets to wobble.
Cohn had once been a Trump favourite, with the president introducing him as a former Goldman banker who had given up hundreds of millions of dollars to join the West Wing.
He was once tipped to be the next head of the Federal Reserve. But he clashed frequently with Trump’s hardline supporters and, according to Michael Wolff’s Fire and Fury, called Trump “dumb as shit”.
Cohn’s departure comes as Trump is clashing with other top Republicans including the House speaker, Paul Ryan, and the Senate majority leader, Mitch McConnell, who have publicly urged the White House to abandon the tariffs proposal as officials in Europe, China and Canada threatened retaliation.
Trump consistently promised to be tough on trade during his election campaign, and Cohn was regarded by fans and foes as a moderating voice.
But since the announcement last week, Trump has doubled down on his intention to press ahead with the tariffs. He said trade wars were “good and easy to win”.
On Tuesday, at a press conference with Swedish prime minister Stefan Löfven, Trump said: “The United States has been taken advantage of by other countries, both friendly and not so friendly, for many, many decades, and we have a trade deficit of $800bn per year, and that’s not going to happen with me.”
He said: “The European Union has been particularly tough on the United States. They make it almost impossible to do business with them, and yet they send their cars and everything else back into the United States. They can do whatever they like but if they do that, then we put a big tax of 25% on their cars and believe me, they won’t be doing it very long.”
Trump went on: “The European Union has not treated us well and it’s been a very, very unfair trade situation. One of the reasons I was elected is I’m protecting our workers, I’m protecting our companies, and I’m not going to let that happen.”
Trump has previously criticised carmakers in Europe, especially in Germany, and on Saturday he warned via Twitter that he would slap a tax on them if the EU retaliated against the proposed 25% steel and 10% aluminium tariffs.
A ‘loving’ trade war
At the White House, Trump did offer possible concessions to other allies. But he said: “When we’re behind on every single country, trade wars aren’t so bad. When we’re down by $30bn, $40bn, $60bn, $100bn, the trade war hurts them, doesn’t hurt us. So we’ll see what happens. We’re going to straighten it out and we’ll do it in a very loving way – it’ll be a loving, loving way. They’ll like us better and they will respect us much more.”
Trump spoke shortly after McConnell joined Ryan in announcing his opposition to Trump’s tariff proposal. McConnell warned that the move could trigger a trade war and damage a growing US economy.
“There is a lot of concern among Republican senators that this could sort of metastasize into a larger trade war,” McConnell said.
The criticism is a rare departure for the Republican leaders, who worked with Trump to pass a $1.5tn tax cut last year.
Republicans doubt Trump is wed to any single plan and are hopeful he can be persuaded to accept a more modest and narrower proposal. But Cohn’s departure may change that calculus.
News of Cohn’s resignation came shortly after Trump claimed that, despite recent turmoil, morale on his team was high. He said: “The White House has tremendous energy, it has tremendous spirit.”
He added: “It is a great place to be working. Many, many people want every single job. Believe me, everybody wants to work in the White House. They all want a piece of that Oval Office, they all want a piece of the West Wing.
“It’s tough. I like conflict, I like having two people with different points of view, and I certainly have that. And then I make a decision. But I like watching it, I like seeing it, and I think it’s the best way to go.”
He said: “So many people want to come in. I have a choice of anybody. I could take any position in the White House and I’ll have a choice of the 10 top people having to do with that position – everybody wants to be there.”