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Trump's Trade War With China Could Leave West Virginia's Energy Sector Seriously Wounded


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A worker cuts steel at a factory in Zouping in China’s eastern Shandong province on April 9, 2018. China said on April 6 it is ready to pay ‘any cost’ in a trade war after US President Donald Trump threatened an additional 100 billion USD in tit-for-tat tariffs on Beijing. / AFP PHOTO / – / China OUT (Photo credit should read -/AFP/Getty Images)

It was supposed to be a campaign stop to tout his newly-passed tax plan. But President Trump’s remarks on proposed Chinese tariffs while in West Virginia zapped some of the energy there. For a state that penciled in a whopping $84 billion trade deal with a Chinese energy company, it’s a sensitive subject.&nbsp;

The president’s decision to put China in his line of fire is much like a circular firing squad: if the United States takes a shot, it too can expect to get hit from many different angles. And its especially odd that Trump would flout $250 billion in total trade deals after returning from China last fall and then turn around and threaten to impose tariffs on imported Chinese goods.

And it could haunt West Virginia’s energy sector. That’s because the China Energy Investment Corp. signed a non-binding $84 billion 20-year deal with the state to help it develop its petrochemical sector that wants access to abundant and cheap shale gas. It is especially needed in a place that has seen its coal industry lose ground to more competitive and cleaner electric generation fuels.

“We, of course, do not want a trade war,” Steve Roberts, chair of the West Virginia Chamber of Commerce told this writer in an interview. “And we are not using terminology that would cause the various sides to go to their corners. We are on courteous terms with the Chinese and are respectful of each other’s views.”

To put this potential deal in context, West Virginia’s gross economic output is about $75 billion a year. IHS Markit projects a&nbsp;$9 billion infusion&nbsp;into the state by 2035, which will employ 57,000 people in gas-related fields, or 7% of the West Virginia’s workforce. Average pay: $90,000 a year, similar to that of the coal sector. Meantime, the state’s current coal industry workforce is 20,000.

But in March, President Trump said — impetuously — that the the United States would impose a 25% tariff on Chinese steel and aluminum coming into the country. Not to be outdone, the Chinese said it would hit American goods with $50 billion in tariffs, although it may increase that an additional $100 billion aimed at goods and services produced that would hurt Trump’s core of support.

In classic “trade war” fashion, the president said on April 5 that the United States would add another $100 billion in tariffs, forcing Trump’s top economic advisor to say that this was all a negotiating tactic.

“President Xi Jinping is a friend of mine,” Trump said at the West Virginia event. “But he’s looking out for China, and I’m looking out for the U.S. You have to go after the folks who aren’t treating you right.”

Calmer Heads

More than 40 companies have warned the Trump administration to not go down this road. They range from the tech giants such as Amazon, Facebook and Microsoft to the retail behemoths like Walmart. Their message: those policies hurt U.S. consumers by forcing them to pay more for products while damaging the ability of American companies to compete. It’s a position endorsed by the U.S. Chamber of Commerce.&nbsp;

Besides the China Energy Investment Corp.’s potential foray in West Virginia, news reports have also pointed to Sinopec’s — an oil and gas explorer in China — possible investment of $43 billion in Alaska. And there’s other non-energy related ventures that involve Boeing selling jets Air China and China Southern and Qualcomm selling semiconductor technology to Chinese smartphones.

The potential deal between the Chinese and West Virginia couldn’t come soon enough. With both the United States and the world community decreasing their reliance on coal as an electric generation fuel, the state needs to find other income sources. In 2012, the U.S. Energy Information Administration said that coal exports totaled about 126 million tons but by 2016, that had fallen to 60 million, although that ticked up a bit in 2017.

The good news is that West Virginia sits a top a huge reservoir of shale gas that the Chinese would like to access. But the Chinese could choose from among other states within the Marcellus or Utica Shale basins. W.V. Chamber of Commerce Chair Roberts says that the state is trying to make the necessary investments in infrastructure and education that can keep China’s full attention.

“We don’t think this is too big of a fish,” Roberts says. “We as a state need to rise to the occasion. We have every reason to believe this is real. What remains to be determined is whether we make the ultimate cut. West Virginia has to up its game.

“We have a real appetite for engaging in a major series of relationships with the Chinese,” Roberts continues. “We have to do this in an international environment in which nations huff and puff. We have things that are very valuable to them and we have to go through a process to see if we can do a deal with each other. The relationship is actually improving and that is a good sign.”

Internationally, the tone is much different from that at the state and the regional levels. West Virginia’s economic developers have their own rapport with Chinese enterprises, which will go where they smell opportunity and where state leaders show them proper respect.

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A worker cuts steel at a factory in Zouping in China’s eastern Shandong province on April 9, 2018. China said on April 6 it is ready to pay ‘any cost’ in a trade war after US President Donald Trump threatened an additional 100 billion USD in tit-for-tat tariffs on Beijing. / AFP PHOTO / – / China OUT (Photo credit should read -/AFP/Getty Images)

It was supposed to be a campaign stop to tout his newly-passed tax plan. But President Trump’s remarks on proposed Chinese tariffs while in West Virginia zapped some of the energy there. For a state that penciled in a whopping $84 billion trade deal with a Chinese energy company, it’s a sensitive subject. 

The president’s decision to put China in his line of fire is much like a circular firing squad: if the United States takes a shot, it too can expect to get hit from many different angles. And its especially odd that Trump would flout $250 billion in total trade deals after returning from China last fall and then turn around and threaten to impose tariffs on imported Chinese goods.

And it could haunt West Virginia’s energy sector. That’s because the China Energy Investment Corp. signed a non-binding $84 billion 20-year deal with the state to help it develop its petrochemical sector that wants access to abundant and cheap shale gas. It is especially needed in a place that has seen its coal industry lose ground to more competitive and cleaner electric generation fuels.

“We, of course, do not want a trade war,” Steve Roberts, chair of the West Virginia Chamber of Commerce told this writer in an interview. “And we are not using terminology that would cause the various sides to go to their corners. We are on courteous terms with the Chinese and are respectful of each other’s views.”

To put this potential deal in context, West Virginia’s gross economic output is about $75 billion a year. IHS Markit projects a $9 billion infusion into the state by 2035, which will employ 57,000 people in gas-related fields, or 7% of the West Virginia’s workforce. Average pay: $90,000 a year, similar to that of the coal sector. Meantime, the state’s current coal industry workforce is 20,000.

But in March, President Trump said — impetuously — that the the United States would impose a 25% tariff on Chinese steel and aluminum coming into the country. Not to be outdone, the Chinese said it would hit American goods with $50 billion in tariffs, although it may increase that an additional $100 billion aimed at goods and services produced that would hurt Trump’s core of support.

In classic “trade war” fashion, the president said on April 5 that the United States would add another $100 billion in tariffs, forcing Trump’s top economic advisor to say that this was all a negotiating tactic.

“President Xi Jinping is a friend of mine,” Trump said at the West Virginia event. “But he’s looking out for China, and I’m looking out for the U.S. You have to go after the folks who aren’t treating you right.”

Calmer Heads

More than 40 companies have warned the Trump administration to not go down this road. They range from the tech giants such as Amazon, Facebook and Microsoft to the retail behemoths like Walmart. Their message: those policies hurt U.S. consumers by forcing them to pay more for products while damaging the ability of American companies to compete. It’s a position endorsed by the U.S. Chamber of Commerce. 

Besides the China Energy Investment Corp.’s potential foray in West Virginia, news reports have also pointed to Sinopec’s — an oil and gas explorer in China — possible investment of $43 billion in Alaska. And there’s other non-energy related ventures that involve Boeing selling jets Air China and China Southern and Qualcomm selling semiconductor technology to Chinese smartphones.

The potential deal between the Chinese and West Virginia couldn’t come soon enough. With both the United States and the world community decreasing their reliance on coal as an electric generation fuel, the state needs to find other income sources. In 2012, the U.S. Energy Information Administration said that coal exports totaled about 126 million tons but by 2016, that had fallen to 60 million, although that ticked up a bit in 2017.

The good news is that West Virginia sits a top a huge reservoir of shale gas that the Chinese would like to access. But the Chinese could choose from among other states within the Marcellus or Utica Shale basins. W.V. Chamber of Commerce Chair Roberts says that the state is trying to make the necessary investments in infrastructure and education that can keep China’s full attention.

“We don’t think this is too big of a fish,” Roberts says. “We as a state need to rise to the occasion. We have every reason to believe this is real. What remains to be determined is whether we make the ultimate cut. West Virginia has to up its game.

“We have a real appetite for engaging in a major series of relationships with the Chinese,” Roberts continues. “We have to do this in an international environment in which nations huff and puff. We have things that are very valuable to them and we have to go through a process to see if we can do a deal with each other. The relationship is actually improving and that is a good sign.”

Internationally, the tone is much different from that at the state and the regional levels. West Virginia’s economic developers have their own rapport with Chinese enterprises, which will go where they smell opportunity and where state leaders show them proper respect.

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