To Bannon, tariffs on China will be ultimate test of Trump's beliefs

If Donald Trump stands firm on US$150 billion (S$196 billion) worth of tariffs he has threatened to impose on China, he will fulfil the promise of his nationalist presidential campaign, said Steve Bannon.
If Donald Trump stands firm on US$150 billion (S$196 billion) worth of tariffs he has threatened to impose on China, he will fulfil the promise of his nationalist presidential campaign, said Steve Bannon.PHOTO: AFP

WASHINGTON (NYTIMES) - To Mr Stephen Bannon, the political strategist who helped get US President Donald Trump elected but no longer speaks to him, the next few weeks will present his former client with the ultimate litmus test.

If Mr Trump stands firm on US$150 billion (S$196 billion) worth of tariffs he has threatened to impose on China, he will fulfil the promise of his nationalist presidential campaign, said Mr Bannon.

If he retreats, because of either a haemorrhaging stock market or a rebellious Republican Party, he will demonstrate that the Trump movement was not much of a movement after all.

"This is going to be a bumpy ride," Mr Bannon said in an interview on Monday (Apr 9). "I don't think he'll back off because of a couple of bad days in the stock market - and I do think he'll have a couple of bad days."

But Mr Bannon said he worried about the lack of support for Mr Trump's moves within the Republican establishment and about pressure from major party donors such as Las Vegas casino magnate Sheldon Adelson, who has huge investments in the Chinese territory of Macau.

"The donor class and the politicians, from Paul Ryan to Mitch McConnell, have thrown in completely with the 'we don't want a trade war' crowd," he said. "My fear is 'What does the money want to do?'"

Mr Trump's moves have already scrambled the political map, winning him improbable Democratic allies such as Senator Sherrod Brown of Ohio, who said he viewed the president's moves as "trade enforcement" rather than a trade war, and Senator Elizabeth Warren of Massachusetts, who on a visit to China last week dismissed years of trade negotiations with Beijing as a "happy-face story that never fit with the facts".

With characteristic bravado, Mr Bannon sees the China showdown as the key to a political realignment in the United States.

"The new politics is not left versus right," he said. "It is globalist versus nationalist."

So far, Mr Trump has sent mixed signals about how far he is willing to press the case against China. On Monday, he vowed to punish Beijing for decades of predatory trade practices, but expressed personal warmth for China's president, Mr Xi Jinping.

Over the weekend, he predicted that China would take down trade barriers and agree to protect America's intellectual property, even as the Chinese ruled out any talks in the current charged atmosphere.

Where others see inconsistency, Mr Bannon sees the culmination of three decades of take-no-prisoners trade rhetoric by Mr Trump. Politicians and scholars may fault his bombastic style, but Mr Bannon said the president had moved the debate on China, which had been stuck in a cycle of accommodation since China was admitted to the World Trade Organisation in 2001.

"For as much as Trump is mocked and ridiculed, he has played a forcing function in this discussion," Mr Bannon said. "Many of the elites, and many of the institutions, have become more much hawkish about China. There are very few cheerleaders anymore."

He added: "It is Trump and his collection of nationalists who have brought this to the forefront."

Mr Bannon was the standard-bearer for the nationalists during the 2016 campaign and as the president's chief strategist before he was ejected from the White House last summer. Though he initially stayed in Mr Trump's good graces - talking to him regularly - the president turned sharply against him after the publication of "Fire and Fury", Michael Wolff's account of the White House, in which Mr Bannon is quoted disparaging the president, his daughter Ivanka and his son-in-law Jared Kushner.

In exile, Mr Bannon has sought to restyle himself as a kingmaker in Republican politics, backing nationalist candidates in congressional races around the country. But he was dealt a stinging setback in Alabama, after his scandal-scarred protégé Roy Moore was defeated in a special election for the Senate by the Democrat Doug Jones.

While Mr Bannon and Mr Trump have yet to repair their rift, the president's moves against China represent a policy victory for his excommunicated aide. During his final weeks in the White House, Mr Bannon kept a whiteboard in his office, on which he had scrawled a calendar for trade actions against China, the European Union and others.

The rollout was delayed for a few months after other advisers, including Treasury Secretary Steven Mnuchin and Mr Gary Cohn, the director of the National Economic Council, persuaded Mr Trump that he should not impose tariffs at the same time he was pushing a tax-cut bill, because it would antagonise Republicans on Capitol Hill.

Later, Mr Cohn and Mr Mnuchin warned the president that protectionist moves would pummel the stock market, which Mr Trump views as a barometer of his success. That was true last week, when the market plunged over fears of a trade war with China. But Mr Trump's more conciliatory tone over the weekend fuelled a modest rebound on Monday.

Mr Bannon blamed the news media and Wall Street for fanning fears of a trade war, even as he conceded that the tariffs would drive up the price of some consumer goods in the United States and that China's retaliation against soybean imports could hurt American farmers.

"The American consumer is going to pay 3 per cent more for their products at Walmart," he said. "Everything is about the American consumer, but what about the American worker?"

Although Mr Bannon is gone from the White House, officials there still share his views, not least Mr Peter Navarro, the director of trade and industrial policy. An economist whose books include "Death by China", Mr Navarro is the intellectual driver of the trade policy.

For Mr Bannon, the trade dispute is part of a larger narrative about how China has systematically exploited the United States, building up its middle class on the backs of American workers by exporting the overcapacity in its steel and other industries. China, he said, posed a far greater threat to the United States than Japan, the Soviet Union or any other historic rival.

"For 20 years, we've not confronted the most significant threat this country has faced," he said. "This is the first time in our history where we really have a competitor with an economy that could be vastly larger than ours."

China, moreover, has dedicated itself to dominating next-generation industries such as artificial intelligence and robotics. It is waging economic and information warfare against the United States - a step short of actual war, though he said that was now more likely than in 2016, when he predicted that the United States is "going to war in the South China Sea in five to 10 years".

"This is far greater than trade; this is far deeper than tariffs," Mr Bannon said of the coming confrontation with China. "This is about a confrontation, on a global scale, between two systems."