By Richard Cowan
WASHINGTON (Reuters) - Conservatives are all smiles this week at an annual convention in Washington, celebrating President Donald Trump's win, but beneath the surface lurk tensions central to how Republicans will govern in the next two years and the 2018 election outlook.
At the four-day Conservative Political Action Conference, once a fringe event that is now decidedly in the Republican mainstream, Trump and Vice President Mike Pence will drop by to help fire up an estimated 10,000 activists in attendance.
Known as CPAC, the event is being held at a new MGM resort and casino located in Maryland, just outside Washington. So Trump, a former casino developer, should feel at home, despite certain unresolved differences with many of his hosts over issues such as trade, taxes and small government.
Just a month into his presidency, Trump is already being compared by some conservatives to their icon President Ronald Reagan, who swept to power in 1981 with a small-government, free-trade, tax-cutting agenda that energized the Republican right-wing and molded the views of many of the CPAC faithful.
Trump so far has been "pitch-perfect with conservatives as he starts his administration," said Matt Schlapp, head of the American Conservative Union, which organizes CPAC.
Even so, some conservatives, including some at CPAC, are nervously watching Trump.
Among other views, Trump has proposed a major expansion of government to police immigration. He has already canceled a trade deal with Asia-Pacific neighbors and he has sharply criticized one between the United States, Mexico and Canada.
"I always worry any discussion about trade competition and tariffs ... misdirects the focus," said CPAC stalwart Grover Norquist, a powerful advocate of low taxes and small government.
On taxes, Trump has backed cuts in rates, but his position on a Republican tax package under debate in Congress is unclear.
"Damn near the entire conservative wish list on tax policy is in his (Trump's) tax reforms," Norquist said.
Whether Republicans and Trump can come to terms over such issues will help determine how much real change they can effect in Washington, and how the voters treat them in two years in the mid-term elections, when ruling parties normally lose ground.
Some Republicans have expressed disappointment that Trump has not moved faster on tax reform and on repealing Obamacare, the healthcare system put in place by his Democratic President Barack Obama. Trump has not yet publicly proposed legislation of any kind, unlike recent first-term presidents.
Schlapp credited Trump with naming the most conservative Cabinet in a half-century and nominating a Supreme Court justice, Neil Gorsuch, who has conservatives' blessings.
Trump has also thrilled conservatives by working hand-in-glove with congressional Republicans on overturning or gutting a handful of Obama-era regulations, including one that prevented coal companies from dumping waste into rivers and streams.
Such regulatory rollbacks and talk of tax cuts have boosted financial markets, too, which have rallied since Trump's win.
CPAC organizers are trying to steer clear of controversy over the alt-right movement, a loose grouping that includes neo-Nazis, white supremacists and anti-Semites who Trump has been slow to denounce. Trump's chief strategist, Steve Bannon, who also will speak at the conference, formerly headed the Breitbart News Network, which appealed to the movement.
"We don't think there's any role for the alt-right in the conservative movement," Schlapp said in a phone interview.
Even Republican moderates, represented by the Republican Main Street Partnership, are gushing over Trump.
"No one is unhappy with what he's doing," said Sarah Chamberlain, president of the group with around 80 members of Congress. She noted Pence has extended a hand to moderates, knowing they are needed to get major legislation passed.
Chamberlain did say that Trump's personality and early White House missteps have "taken up all the oxygen."
Nevertheless, she was optimistic, saying Trump is moving beyond initial stumbles and "seems to be coming into his own."
(Additional reporting by John Whitesides; Editing by Kevin Drawbaugh and Leslie Adler)