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Steve Bannon is back – big time. While he has no official role in Donald Trump’s re-election campaign, he’s getting a lot of air time because he helped propel Mr. Trump to an unlikely victory in 2016, when he was his campaign boss.

Mr. Bannon admits that Mr. Trump is fighting an uphill battle but insists that one issue – China – could win him votes and push him over the top in November. The Cold War between the United States and China is heating up. Almost every day, Mr. Trump takes a shot at China over trade, Huawei’s 5G rollout, the spread of COVID-19 and Hong Kong, which is about to come under China’s new security law.

In an interview published this week in Asia Times, Mr. Bannon said: “This confrontation with the Chinese Communist Party, I believe, will be the single defining aspect of 2020. … President Trump’s the only American president that has stood up to the Chinese Communist Party.”

The countries of the European Union are caught in the U.S.-China crossfire. Before the Trump era, they could court both American and Chinese trade and investment – a rather sweet geo-economic hedge. China was even encouraged to play key roles in EU infrastructure projects, such as the rebuilding of the Port of Piraeus, near Athens.

For the EU, that era is coming to an end: Now it has to take sides – the U.S. or China.

You might think all EU countries would automatically throw their lot in with with Mr. Trump’s America. The U.S. used its Marshall Plan to help rebuild Europe after the Second World War. It was – and remains – the dominant force in NATO, whose bases are scattered across Western Europe. The U.S. is the top foreign investor in the EU and in 2018 was still the bloc’s top trading partner, followed closely by China.

But Mr. Trump is not making it easy for EU countries to side with the U.S. He pulled his country out of the 2015 Paris climate agreement and gutted the World Trade Organization’s dispute-resolution mechanism. He slapped tariffs on a wide range of EU exports, including food, apparel and aircraft. Last month he announced he would end U.S. funding of the World Health Organization, which he accused of being a “puppet of China.” He has lobbied EU countries to ban the use of Chinese equipment in their telecom networks, alleging the gear is used for espionage.

Italy, the EU’s third-largest country, is in an especially difficult position. Last year it became the first Group of Seven country to join the Belt and Road Initiative (BRI), China’s hugely ambitious global development and financing strategy. The BRI has made infrastructure investments in dozens of countries, buying political influence along the way. The White House is convinced the BRI is just another tentacle of China’s globe-spanning octopus.

The Italian government rolled out the welcome mat to Chinese President Xi Jinping in part because it is desperate for foreign investment. Italy suffers from crushing youth unemployment and never fully recovered from the 2008 financial crisis. It felt it was more or less abandoned by the U.S. and the rest of the EU on the investment front. The anti-EU sentiment among Italians rose during the migrant crisis, when other countries of the bloc refused to relieve Italy’s migrant burden, and rose again earlier this year, when Brussels ignored Italy’s initial pleas for help to fight COVID-19.

A Demos “trust” poll published last month by La Repubblica revealed that China has support across the political spectrum. Among voters who back the centre-left Democratic Party, which forms the ruling coalition with the anti-establishment Five Star Movement, support for China was at 33 per cent, compared with just 22 per cent for the U.S. Among Five Star voters, support for China and the U.S. was essentially tied at about 32 per cent. Those are high numbers, given Mr. Trump’s relentless attacks on China and the Western countries that are cozying up to Beijing.

The EU countries, especially Italy and Germany, which counts China as its third-biggest trading partner, have a dilemma. If they move closer to China, they risk retaliation from the White House. U.S. tariffs on EU goods could go up. Transatlantic military and intelligence co-operation could be curtailed. Sanctions could be placed on any country that invites Huawei to build its 5G networks.

Chancellor Angela Merkel wants greater German access to the Chinese market, but she is under enormous pressure to defend Hong Kong’s autonomy and not shy away from making it known she’s not happy with China’s human-rights record. Italy hopes Germany finds a political balance that antagonizes neither the Americans nor the Chinese, but that may be impossible. “Italy is trying to hide behind Germany,” said Francesco Galietti, chief executive of Policy Sonar, a political risk consultancy in Rome.

What the EU really wants is a Joe Biden win in the November elections. If Mr. Trump loses, the EU countries might be able to return to their old strategy of not taking sides. But if he wins, all bets are off – they will have to decide whether their true ally is the United States or China.

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