Steve Bannon: There is no chance Trump is going to back down in the China trade war

There is “no chance” President Donald Trump is going to back down in the U.S. trade war with China, former Trump advisor Steve Bannon told CNBC Wednesday.

“China has been running an economic war against the industrial democracies for 20 years,” said the hardline ex-White House chief strategist, who helped craft Trump’s nationalist message.

Bannon said previous presidents — Bill Clinton, George W. Bush, and Barack Obama — passed the buck on addressing and fixing the problems of China’s protectionist economy. But Trump is not shying away from the fight, he added.

Under Trump, Washington has taken a tougher stance on China compared to previous presidential administrations. In addition to disputes around trade and the alleged Chinese theft of U.S. intellectual property, American intelligence chiefs expressed their distrust of Chinese tech giant and Apple rival Huawei as well as Chinese telecom company ZTE.

The standoff with China  “cuts to the core of what the United States is going to be in the future,” Bannon said in a “Squawk Box” interview.  “We have all the cards.”

U.S. officials have repeatedly said the Chinese stock market and economy has suffered more than those in the U.S., and will continue to bear the brunt. On Wednesday, China reported surprisingly weaker growth in retail sales and industrial output for April, adding pressure on Beijing to roll out more stimulus as the trade war with the United States escalates. China’s Communist Party has remained defiant, putting out a rallying cry in state media.

With trade talks at a stalemate, the U.S. is considering putting tariffs on the remaining billions and billions of dollars worth of Chinese goods coming into the U.S. Last week, the Trump administration followed through on its threat and increased duties on $200 billion worth of Chinese products from 10% to 25%. On Monday, in retaliation, China announced plans to raise tariffs, some to as high as 25%, on $60 billion in U.S. goods.

Trump’s tweets and tough public rhetoric aside, negotiators for both sides need to get behind closed doors and work hard on getting an agreement, Bannon said. “This is not going to take place overnight.”

Since May 5, when Trump surprised investors with tweets threatening higher tariffs on China, the S&P 500 had lost about $1.1 trillion in value — the type of decline that if it were to persist could put a real drag on U.S. economic growth. The index made some of that back with Tuesday’s nearly 1% recovery after Monday’s 2.4% decline. Despite the knock from trade concerns, the S&P 500 was still only 4% away from its May 1 all-time intraday high, and up more than 20% since the 2018 low on Christmas Eve.

The China dispute certainly makes for strange bedfellows, with Trump facing calls from Wall Street and free-trade conservatives to reach a deal, and Democrats like Senate Minority Leader Chuck Schumer urging the president to extract the most concessions possible from China.

However, Trump won’t bow to the pressure and make a superficial agreement that doesn’t address all the ways Beijing is cheating economically, said Bannon, adding he believes the China issue will frame the 2020 presidential campaign in favor of the president.

— CNBC digital correspondent in Singapore Yen Nee Lee and Reuters contributed to this report.

CNBC’s before the bell news roundup

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