The first time Salman Rushdie met Donald J. Trump, the future president of the United States of America, was at a rock concert. Rushdie, the acclaimed author of Midnight's Children and The Satanic Verses, among other novels, had tickets to see Crosby, Stills & Nash at Madison Square Garden. When he arrived at the venue, he found himself sitting next to the real estate tycoon and his family.

"To my surprise, he was on his feet and knew all the words to all the songs," Rushdie recalled the other day. "I thought, 'Really? Donald Trump knows all the words to Woodstock?' That was odd. Then we met another time …"

The second encounter took place in a more cultured setting, New York's Metropolitan Opera House, during the waning weeks of the summer, while the U.S. Open tennis championships were taking place. "He asked me, very generously, if I would like his box at the U.S. Open because, as he put it, 'it was the best box' and 'it was better than all the other boxes,'" Rushdie said with a laugh. "Well, I didn't take up the offer. These are my interactions with the leader of the free world."

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While Trump is not the subject of Rushdie's superb new novel, The Golden House – nor is he even mentioned by name – the 45th President of the United States casts a long shadow over the book, a darkly humorous and humane exploration of family, history and whether it's possible to be both truly good and wretchedly evil at the same time.

"Really," Rushdie said, "the novel is about human beings in a time of insanity."

The novel, his thirteenth, tells the story of Nero Golden, a business mogul of dubious character who flees his unnamed hometown, along with his three sons, after the tragic death of his wife. The family arrives in New York, where they install themselves in a Greenwich Village mansion, take on new identities and quickly embed themselves in the tumult that is modern American life.

The story is set for the most part in a housing complex bordering the MacDougal-Sullivan Gardens district, which in Rushdie's conjuring is a cloistered community of diplomats, artists and academics. (In real life, residents include Vogue editor Anna Wintour and Italian artist Francesco Clemente and his wife, Alba, a costume and set designer, to whom the novel is dedicated.)

The family reacts to their new country and surroundings in different ways. The eldest son, Petya, an alcoholic (and possibly autistic) agoraphobe with a talent for video-game design, retreats into his own restless world. The middle child, Apu, throws himself into Manhattan's art scene. The youngest, Dionysus, known as D, falls in love and finds the strength to confront his struggles with gender identity. Nero, meanwhile, much to the chagrin of his sons, soon becomes engaged to the much younger Vasilisa, who, among other skills, is "accomplished in the arts of deceit." The novel's narrator – or documentarian, considering his career – is their neighbour René, a young filmmaker who serves as the Nick Carraway to the novel's Gatsbyesque brood.

"On the one hand, I was trying to write a big social novel," Rushdie said over the phone from his home in New York. "But I was also trying to write right up against the present moment. And that's a risky thing, I think, to do – for anybody – if you want to write a book that endures. Because if you get it wrong, you can get it horribly wrong. You don't want your book to be so closely tied to present events that it becomes irrelevant when times change."

But it's difficult to read The Golden House without thinking of present events. And it was impossible to ignore such events on the morning I spoke to Rushdie, a few days after the protests in Charlottesville, Va. At one point, for instance, a character returns to work in an institution called the Museum of Identity, where she "worked on new rooms chronicling and displaying the rise of the new 'identitarian' far right, the arrival in America of the European ultraist movement … but focusing, above all, on the schismatic convulsion that had gripped America following the triumph of the cackling cartoon narcissist, America torn in half, its defining myth of city-on-a-hill exceptionalism lying trampled in the gutters of bigotry and racial and male supremacism, Americans' masks ripped off to reveal the Joker faces beneath." As I read Rushdie's novel, footage from Virginia, with angry young men not hiding their faces, was splashed across my TV.

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"Somebody said to me, two days ago, that we're six months into the Trump presidency and we have Nazi flags marching down the streets of American cities and we're on the edge of a nuclear war. In six months! To have had this national meltdown at this speed is, is …" Rushdie's voice trailed off, defeated. "I'm not surprised that Trump is like this, because he's always been like this. But it's very shocking to see how fast things have deteriorated."

In the days and weeks after Trump's inauguration, there was both a turning to old novels that might help explain the current American climate – 1984, The Handmaid's Tale, It Can't Happen Here – and, at the same time, hand-wringing about the fact the novel could no longer compete with the current reality – "Trump is stranger than fiction," read one Los Angeles Times headline; "Is Trump ruining book sales?" asked the New Republic.

Rushdie brushed such concerns aside.

"Almost from the birth of the novel, you could pronounce it dead," he said, then proceeded to list the various times critics have tried to bury the form. "It's very resilient. It's a really useful and valuable form because of its incredible malleability. … Of course it can grapple with even this. And I think it's our job to try and do so. I know a lot of writers here [in America] have been asking themselves how to proceed in this moment. And my view is you just proceed. You try and create interest and beauty, because that's the job. That's the thing that we're trying to defend and stand up for – our ability to create art and to understand ourselves through these processes of imagination. Of course we're going to go on doing it! And depending on how good we are, people can judge whether we've done it well or badly. But the effort doesn't change."

Despite its connection with the political moment, most of The Golden House is actually set during the eight years of Barack Obama's administration (the novel begins, "On the day of the new president's inauguration …"). In fact, Rushdie estimated that 95 per cent of it was written before last November's election. "The Trump stuff is significant in the book, but it's essentially the context rather than the text," he said. "I had the character of Nero Golden in my head for quite a few years. This very, I think, morally complex man who is on the one hand deeply flawed and on the other hand quite loving of his children."

It's this dichotomy that serves as the heart of the novel; it is, Rushdie told me, "the question around which" the character of Nero was shaped. At one point, René, reeling from a tragedy in his own life, sits down with Nero, who tries to offer the young man some life advice: "Maybe you guessed already that I am not always a saint," Nero says. "I am hard and boastful and used to a certain superior position and what I want I take and what I don't want I clear out of my way. But when you are facing me you must ask yourself the following question: Is it possible to be both good and evil? Can a man be a good man when he is a bad man?"

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Rushdie had an immediate answer to his character's question: "The answer is obviously yes. It shouldn't even be a question. It's just that we now live in an age where there's an attempt to reduce all of this to a two-dimensional flatness. We're this or we're that. Whereas, actually, what the novel has always known is that people are many things at the same time. The art of the novel is the demonstration of the fact that people are many things at the same time. So it should be obvious to everybody that people can be extremely flawed and reprehensible in their behaviour in one aspect of their lives and admirable and noble in another aspect of their lives. It should be easy for us to grasp that but, somehow, it's become more difficult. And so I wanted to renew that idea of the complexity of human lives."

His own life, the narrative of which is well known, illustrates the complexities of the human experience. He's a man who has roots in three countries – India, where he was born; Britain, where he went to school and lived much of his life; and the United States, where he has resided for almost 20 years. He has been married four times. He's written essays, screenplays, short stories, children's books, travelogues and novels including the aforementioned Midnight's Children, which won the Booker Prize in 1981, when he was in his early 30s, and The Satanic Verses, which resulted in the Ayatollah Ruhollah Khomeini issueing a fatwa against his life, a period he chronicled in his 2012 memoir, Joseph Anton.

Yet The Golden House shows that, at 70, Rushdie is still a profoundly necessary voice in contemporary literature.

For a while, that voice reached out to Twitter. Rushdie was an active and fairly prolific user, engaging with friends, critics and strangers alike and posting more than 4,000 times. His final tweet came on Nov. 8 last year. It was a photo of Rushdie, apparently having just cast his vote – the first time he'd voted in a presidential election. It read: "Done. You're welcome." The hashtags were #MadamPresident and #ImWithHer. There was a wry, maybe cautious smile on the author's face.

Still, despite that night's results and what has transpired since, he vowed he would stay in New York.

"Twenty years is a long time, and I think I'm quite deeply established here now," he said. "When I first moved to New York, which was around the turn of the century, I really wasn't sure if I was coming for six months or the rest of my life. For a long time, I didn't buy a place in New York, I rented a place. I just thought: I'm going to see what happens. And what happened was that I felt almost immediately very at home here. It became quite clear to me that I wasn't going anywhere.

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"New York is not Trump's America," he added, then laughed: "People really, really don't like him here. And also people know him here. He's been here a long time and people got his number here a long time ago. Basically, America is now discovering what New Yorkers have always known about what a jerk he is."