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Arkansas town caught up in fears over trade

August 9, 2018

ARKADELPHIA, Ark. — A Chinese company’s announcement two years ago that it would spend more than $1 billion and hire hundreds of workers for a paper mill on the outskirts of this rural college town was seen as a much-needed shot in the arm for the region’s economy.

A web video promoting Arkadelphia — “It’s a great place to call home!” — continues to tout the Sun Paper project and its potential to generate jobs and boost development. But optimism has been giving way to concern in recent months amid President Donald Trump’s escalating trade dispute with China.

The threat of a full-blown trade war has delayed the project further and prompted the state’s governor to send his top economic development official to China to make sure it stays on track. It also has caused other Chinese companies considering investing in Arkansas to put their plans on hold.

The uncertainty in Arkansas, where voters overwhelmingly supported Trump in the 2016 president election, highlights how U.S. states are trying to ease the sting of the president’s threatened trade war by appealing directly to Chinese companies.

Other states are also counting on trade deals with China, including West Virginia. Last November, Trump and Chinese President Xi Jinping looked on in Beijing as officials from the Mountain State and a Chinese energy company signed what was hailed as a landmark deal for West Virginia. Under the deal, China Energy Investment Corp. would invest more than $80 billion over the next 20 years in West Virginia’s natural gas industry.

Chinese companies invested $29 billion in the U.S. last year, virtually all of which was related to corporate mergers and acquisitions, according to the research firm Rhodium Group. While that was down from a record $46 billion in 2016, those investments remain crucial for local economies.Trump’s trade dispute has squeezed U.S. states and communities in at least two ways: It has slowed direct investment, as in Arkansas, and the retaliatory tariffs imposed by other countries have made it harder for local farmers and manufacturers to sell abroad.

In Arkansas alone, retaliatory tariffs from China, the European Union, Mexico and Canada threaten $339 million in exports, according to the U.S. Chamber of Commerce.

The tariffs Trump imposed on China were estimated to add $150 million to the original $1.8 billion price tag of the Sun Paper plant in Arkadelphia, prompting the company to delay its plans.

“It’s obvious that with uncertainty, businesses hesitate to invest in new projects. That’s whether you’re a United States businessman or whether you’re a China investor,” Gov. Asa Hutchinson said.

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