Governor says Trump’s call to exit China ‘would be a mistake’

On Friday (Aug. 23), President Donald Trump called on American businesses to withdraw operations from China as the trade war between the U.S. and the Asian giant escalated. Gov. Asa Hutchinson, who has helped negotiate six Chinese companies to locate in Arkansas, said Saturday that disengaging from the Chinese economy “cannot be done without devastating impact.”

Trump tweeted on Friday: “Our Country has lost, stupidly, Trillions of Dollars with China over many years. They have stolen our Intellectual Property at a rate of Hundreds of Billions of Dollars a year, & they want to continue. I won’t let that happen! We don’t need China and, frankly, would be far better off without them. The vast amounts of money made and stolen by China from the United States, year after year, for decades, will and must STOP.

“Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing your companies HOME and making your products in the USA. I will be responding to China’s Tariffs this afternoon. This is a GREAT opportunity for the United States.

“Also, I am ordering all carriers, including Fed Ex, Amazon, UPS and the Post Office, to SEARCH FOR & REFUSE, all deliveries of Fentanyl from China (or anywhere else!). Fentanyl kills 100,000 Americans a year. President Xi said this would stop – it didn’t. Our Economy, because of our gains in the last 2 1/2 years, is MUCH larger than that of China. We will keep it that way!”

In response to China raising tariffs on U.S. goods, Trump also said he was raising existing tariffs of 25% on certain Chinese goods to 30% and raising tariffs on another round of Chinese products from 10% to 15%.

Trump also complained that Federal Reserve Bank Chair Jerome Powell was not being aggressive enough with U.S. monetary policy, eventually tweeting, “My only question is, who is our bigger enemy, Jay Powell or Chairman Xi?”

His calls demanding that American companies halt commerce with China, the raised tariffs, and his questioning of Powell’s leadership sent the financial markets into a tailspin. The Dow Jones Industrial Average closed on Friday 623.34 points lower, or 2.4% at 25,628.90. The S&P 500 fell 2.6% to close the week at 2,847.11. The Nasdaq Composite plummeted 3% to end the day at 7,751.77.

Trump’s ordering of American companies to quit doing business in China is predicated on his interpretation of the 1977 International Emergency Economic Powers Act. According to the U.S. Treasury Department, that law “may be exercised to deal with any unusual and extraordinary threat, which has its source in whole or substantial part outside the United States, to the national security, foreign policy, or economy of the United States, if the President declares a national emergency with respect to such threat.”

It also says the President “in every possible instance, shall consult with the Congress before exercising any of the authorities granted by this chapter and shall consult regularly with the Congress so long as such authorities are exercised,” including transmitting a report prior to action and providing “periodic follow-up reports.”

IN ARKANSAS
Arkansas has worked on six different foreign direct investment manufacturing projects with Chinese officials totaling more than $1.6 billion during the Hutchinson administration. They include announcements of Shandong Ruyi Technology (800 new jobs in Forrest City), Sun Paper (250 new jobs in Clark County), Tianyuan Garments (400 new jobs in Little Rock), Risever Machinery (130 new jobs in Jonesboro), Dragon Woodland (75 new jobs in Helena-West Helena), and Pet Won Pet Products (70 new jobs in Danville).

Walmart and Tyson Foods have significant operations in China with Walmart increasing investments recently in its logistics operations with a $1.2 billion commitment. The state has also long benefitted from agricultural trade relationships with China. Since Trump imposed tariffs on China, Arkansas farmers – particularly in the soybean field – have seen that market evaporate.

In a speech last week, U.S. Rep. Rick Crawford, R-Jonesboro, told agricultural leaders that the Chinese were “dishonest brokers.” In July, Crawford wrote a guest editorial for Talk Business & Politics in which he claimed China had “flouted the rules of the [world] trade organization and conducted themselves in a belligerent economic manner” by releasing “false supply and demand reports.”

Gov. Hutchinson said Trump’s tweet storm on Friday was the President’s way of saying that this “long, painful trade war” has no sign of a near-term solution.

“Our American companies need to be prepared for it,” Hutchinson tells Talk Business & Politics. “Now, he’s also in essence saying that our American economy needs to disengage from the Chinese economy and that cannot be done without devastating impact. Our economies are intertwined and have been for decades. It’s one thing to try to equalize our trade. It’s another thing to withdraw from trade with China. I think that would be a mistake.”

Hutchinson said despite the tension between the two countries, he is still optimistic that previously announced Chinese investments in Arkansas will continue.

“Those are decisions that are made by the Chinese investors. They look at the economy just like everyone else and they look at the trade disputes and the impact it’ll have on their individual businesses,” he said. “I have not seen any indication that, with the current investments, that this is making a difference.”

“But the more animosity, the more fuel that is put on the fire, the more difficult it is for those investments to be sustained and to finish out those that are works in progress. So, it just makes the environment much more challenging,” Hutchinson warned. “I know that those investments and those jobs are very important for a lot of smaller communities that are around Arkansas, from Helena to Arkadelphia to Jonesboro. So, I’m optimistic that those investments will continue, but it certainly puts a strain on the timetables.”

Talk Business & Politics has reached out to U.S. Rep. French Hill, R-Little Rock, for comment on the President’s approach. Hill, a former banker and U.S. Treasury official during the George H.W. Bush administration, sits on the House Financial Services Committee, including the Subcommittee on National Security, International Development and Monetary Policy. He offered this reaction to the president’s commentary on the Fed and China.