Make trade war unbearable

‘Trump won’t back down’: US president plans to make trade war unbearable for China and bigger than ever, Steve Bannon says

In an exclusive interview, the former White House chief strategist says Beijing was caught off guard by the magnitude of the plan he hatched with Trump

By SASHA GONG

This story is being published for Pros as part of a content partnership with the South China Morning Post. It originally appeared on scmp.com on Sept. 21, 2018.

US President Donald Trump’s strategy is to make the trade war with China “unprecedentedly large” and “unbearably painful” for Beijing, and he will not back down before victory, former White House chief strategist Steve Bannon said in an exclusive interview.

Bannon said the aim was not just to force China to give up on its “unfair trade practices” – the ultimate goal was to “re-industrialise America” because manufacturing was the core of a nation’s power.

He also took aim at the “Made in China 2025” plan – an attempt by Beijing to catch up with the West in 10 key technology sectors, saying China was using generous government support to reduce its reliance on the West for future technology.

Bannon, who claimed to have helped Trump draw up the trade war plan, said that in the past, tariffs had been limited to imports of between roughly US$10 billion and US$30 billion but the sheer magnitude of the more than US$500 billion in question this time had “caught Beijing off guard”.

“It’s not just any tariff. It’s tariffs on a scale and depth that is previously inconceivable in US history,” Bannon said.

He said Beijing had relied on “round after round of talks” to take the momentum out of the US punitive measures, but the delaying tactics would not work.

“They always want to have a strategic dialogue to tap things along. They never envisioned that somebody would actually do this.”

He and Trump were convinced the US would win – and there were signs the Chinese elite were too, with “so many senior Chinese officials exhausting all channels” to move their money out of China and into real estate in San Francisco, Los Angeles and midtown Manhattan.

“Why [does there have] to be massive capital controls placed on Chinese money? Otherwise all will flee to midtown Manhattan ... They want to buy real assets in the US. That shows you a dramatic lack of confidence in their own economy.”

Bannon, who left the Trump administration after a tumultuous seven-month stint, said trade had always been at the top of the campaign strategy – first discussing the idea five years ago with then senator Jeff Sessions, who later become Trump’s attorney general.

“This is where Jeff Sessions and I sat in 2013 as we were trying to imagine what the 2016 presidential election would look like,” Bannon said in his “Breitbart Embassy” townhouse near the Capitol Building in Washington. “We made trade the top issue, when trade was not even among the top 100 issues of the others.”

Trump and Bannon have a turbulent and complex relationship. Although Trump fired Bannon in January and criticised him for his involvement in Fire and Fury, journalist Michael Wolff’s book about the 2016 campaign and early days of the administration, the president was back in contact with Bannon in May, according to The Wall Street Journal. Bannon also insisted that he and the president “see eye to eye” on trade.

He said there was little difference within the US political elite – either Democrat or Republican – on the issue of international trade, and in his first meeting with Trump in 2015, both men agreed that the Washington and Wall Street establishment would “side with China” in the upcoming trade war.

The two decided to change the international trade regime to “dramatically reduce [the US] trade deficit” and to re-industrialise America, especially the so-called rust belt states.

He said Trump would “never back down in the trade war [with China]”, even though the president anticipated the policy would face “massive resistance domestically and internationally”.

He accused “Western elites” of working with Beijing to make themselves rich. “Our factories got shipped out of here. Wall Street made a fortune. The private equity made a fortune. Right now President Trump’s focus is on stopping it.”

Apart from imposing the unprecedented tariffs, the Trump administration would use Section 301 of the Trade Act to press China on intellectual property rights and stop Beijing from forcing American companies to transfer their technology to Chinese partners, the former chief strategist said.

Section 301 authorises the US president to retaliate against any action that violates an international trade agreement or is unjustified, unreasonable or discriminatory, and that burdens or restricts US commerce.

Bannon said Washington should also retain some ability to “cut off” some key parts of the supply chain with China when necessary – as it did in the case of Chinese telecommunications giant ZTE.

Trump banned sales of American technology to the company in July, almost bankrupting it and putting up to 100,000 highly paid Chinese jobs in danger before lifting the ban.

“It is very important to the Chinese audience [to remember] the case of ZTE. The central theme of Made in China 2025 is that the Chinese are trying to get off the supply chain – the component parts of the supply chain – of the West. The Chinese are very vulnerable there. Their government should never allow them to get into a situation with all this aggressiveness in their trade policies.”

But in the end the trade war and US tariffs were about more than the economy and rebuilding American manufacturing.

“The elites and the media are trying to convince you that this inexpiable leaving of the factories and jobs is but a law of physics. The opposite is actually true – it is the human action which did it. It can be reversed and it will be reversed,” he said.

“[The] tariff is about human dignity and human pride ... Not everyone wants to work for an insurance company.”