By Kristina Peterson and Richard Rubin

PHILADELPHIA -- President Donald Trump and congressional Republicans struggled to understand each other at the party's retreat here on Thursday, as they fell short of reaching agreement on complex policy issues involving taxes, trade and other pillars of the ambitious legislative agenda they hope to enact this year.

Less than a week into the new administration, GOP lawmakers grappled with how to respond to a Republican president capable of signing their policy proposals into law, but also of igniting public feuds and showing little deference to Capitol Hill's traditions.

"This is going to be an unconventional presidency," House Speaker Paul Ryan (R., Wis.) told reporters. "That's something we're just all going to have to get used to."

But Mr. Ryan also said, "We are on the same page," referring to the agenda the president and Republican lawmakers are pursuing.

Mr. Trump on Thursday afternoon appeared to embrace a key component of the House GOP "border adjustment" plan to overhaul the tax code by taxing imports and exempting exports. But later, White House Press Secretary Sean Spicer walked back the proposal, saying it was only an example of how to pay for the planned wall on the U.S.-Mexico border.

The varied signals on the tax plan came after a morning of heightened tensions between Mr. Trump and the government of Mexico. His demands that Mexico pay for construction of the border wall -- most recently in a Twitter message Thursday morning -- prompted Mexican President Enrique Peña Nieto to cancel a planned meeting with Mr. Trump next week. Mr. Trump told Republicans that the two leaders hadmutually decided to call off the meeting.

While Republicans are largely supportive of tightening border security, some raised concerns over Mr. Trump's decision to conduct high-stakes international diplomacy over Twitter.

"We need to be a bit more measured in dealing with Mexico," said Rep. Charlie Dent (R., Pa.). "I do not want to do anything here that would raise up anti-American voices in Mexico and other parts of Latin America, " he added.

Other Republicans said the president, with his pugnacity and business background, was just bringing his own style to the Oval Office.

"What you're seeing on display here is just a leader who knows how to get things done," said Rep. Tom Reed (R., N.Y.). "It may be a little more direct than we're accustomed to."

The confusion over taxes and Mexico capped a dizzying first week for Mr. Trump, who released a blizzard of executive orders, complained about media reports of his inauguration crowd size and called for an investigation into unsubstantiated allegations of voter fraud. GOP lawmakers said they hoped he would increasingly train his focus on policy.

"We've moved on. The election's over with," Sen. John Thune (R., S.D.) said, when asked about the electoral fraud investigation.

Others said that Mr. Trump's strategy shouldn't be underestimated. "He's completely winning the expectation game," said Rep. Peter Roskam (R., Ill.). "He's a genius at lowering expectations and overperforming."

Meanwhile, hours of policy discussions at the GOP retreat in Philadelphia haven't yet yielded a plan for repealing the Affordable Care Act, one of the party's top goals.

Republican leaders essentially have been forced to alter their initial plan to gut the law and then take some time to work on a replacement. Their plan changed when Mr. Trump and some other Republicans said a replacement should be in hand beforevoting for a repeal, in order to minimize disruptions in the health-insurance markets. GOP lawmakers are now accelerating the development of a replacement plan, but many key policy details remain unresolved.

Mr. Trump, for instance, has said the new GOP plan should provide "insurance for everybody," while GOP leaders have only pledged to give everyone "access" to affordable health care.

When Mr. Ryan mapped out an ambitious 200-day legislative agenda at the retreat's start, he didn't include a proposal to rebuild the country's aging infrastructure, but noted that Mr. Trump wanted to add it, lawmakers said.

Mr. Trump, meanwhile, made clear that infrastructure was a personal priority.

"The thing I do best in life is build," the president, whose sons are now running his real-estate empire, told Republicans on Thursday. "Our infrastructure's in serious trouble. We have to fix what we have."

Republicans have generally said they are willing to improve the country's roads, bridges and ports, but want to find a way to do so without adding to the federal budget deficit.

--Siobhan Hughes and Byron Tau contributed to this article.

Write to Kristina Peterson at kristina.peterson@wsj.com and Richard Rubin at richard.rubin@wsj.com

(END) Dow Jones Newswires

January 26, 2017 20:00 ET (01:00 GMT)

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