IOWA: In 1985, as an official of the Chinese lower-level party, Xi Jinping visited the city of Muscatine in the state of Iowa on an agricultural study mission.
He made friendships and memories with his hosts, including Muscatine resident Sarah Lande, one of the travel coordinators.
“He seemed like a person happy to be in America because he said it was the first time he had been to America. And he had a question, a question, a question, ”the 82-year-old recalled.
“China was just opening up and we were eager to learn more from them. And maybe those of us. “
When Xi returned to the United States in 2012 as China’s vice president, he insisted on visiting Muscatine and his old friends like Lande again.
“Xi Jinping told me,‘ You know, if we could have an exchange in all areas – sports, work, art – if our people get to know each other, then our countries could get along, too, ’” she said.
The American friendship story of the current Chinese president paved the way for increased Chinese interest and investment in Muscatine (population: 24,000).
These include the $ 42 million Merrill Hotel and Conference Center, opened in 2018 and built with the help of a Chinese investor, – exchange programs in China for Muscatine students and Chinese interest in the proposed port along the Upper Mississippi River.
Chinese investor Glad Cheng decided in 2015 to split the time between Muscatine and Beijing, dreaming of global friendship. He even bought the country house where Xi stayed in 1985 and turned it into a Sino-American friendship house.
Cheng’s investments and the investments of other Chinese entrepreneurs helped recruit Muscatine residents. But since the U.S.-China trade war began in 2018, tourist and business visits have declined. The once busy Merrill is mostly empty.
What happened in Muscatine provides a microcosm of the impact of bilateral tensions on both countries, far from the halls of power in Beijing and Washington.
The outburst is immeasurable, the When Titans Clash series reveals. But there is also hope, just as it was not so long ago when he was welcomed back by Xi’s oldest friends in the US.
In 2017, Chinese foreign direct investment in the U.S. amounted to $ 30 billion. That fell to $ 5.4 billion in 2018, $ 5 billion in 2019 and only $ 200 million in the first quarter of last year.
When Kent Corporation, Muscat’s main employer, wanted to build an international river port in Iowa, Chinese shipping company Cosco expressed interest in the project. Then the trade war hit and the project was kept.
Muscatine Mayor Diana Broderson said, “When decisions are made at the highest levels between countries, it comes down to what’s happening in a small town in America, here in Muscatine.”
WATCH: Chinese President Xi Jinping’s oldest friends in the US (6:00)
Soybean grower Iowan Rick Kimberley once flourished with China. Xi visited his 4,000-acre farm in 2012 and wanted to use it as a model of modern agriculture for China.
“That’s how we started the Sino-American demonstration farm (in Hebei Province),” Kimberley said.
“As soybean farmers in the United States, we have a 35- to 40-year relationship with China. I have been to China more than 20 times – I have visited over 60 cities and 12 provinces. So, I went through a good part of China.
“We helped work on this relationship.”
The Friendship Farm in Hebei broke through in 2017 as part of a research and agro-tourism park that will be connected to Beijing by road and high-speed rail link.
But since the trade war broke out, the Chinese media have not mentioned the farm.
When the Trump administration slapped tariffs on U.S. imports from China in 2018, China retaliated with a 25 percent tariff on U.S. soybeans, among other things. Profit margins have tightened and many farmers have gone bankrupt.
“As two great nations, the United States and China, we need each other. And we need China to keep buying our products, ”Kimberley said.
Despite a first-phase agreement for China to procure more U.S. goods, including soybeans, export levels at the end of last year are still below pre-duty days. He therefore hopes for a second-phase agreement.
CASUALTS IN THE GREEN ECONOMY
Representatives of the solar industry in the US also hope that the Biden administration will negotiate a second-stage trade agreement, as the story of their industry also shows the consequences of the trade war.
The best year in the U.S. industry was 2016, when solar power was responsible for a higher share of employment in the power generation sector (43 percent) than the entire fossil fuel industry (22 percent).
It looked like solar and other renewables would “soon revolutionize the U.S. energy sector” and trigger a boost to lower carbon emissions, Forbes magazine reported.
While China dominated the global solar industry with its cheaper panels, it helped boost solar energy adoption in the U.S., which in turn created more jobs for skilled workers to install panels in homes and industry.
Then Donald Trump took office, and a year later, his administration fired a 30 percent tariff on sun imports. Supply has fallen and 62,000 jobs have been lost or not created, according to the U.S. Solar Energy Industry Association.
Forbes 30 under 30 entrepreneur James Ellsmoor wrote in 2019 magazine: “The growing uncertainty created by tariffs has led many developers to cancel and freeze billions of dollars of investment.
“Tariffs have already very obviously had an impact on the solar sector, and CEOs have been sunbathing due to increased costs and the loss of several large projects.”
Across China, the trade war forced its producers to turn to the fast-growing local market.
More than 10 years before that, Matsutek had made a name for itself as an original equipment manufacturer for brands such as Philips and Honeywell. That strategy helped it become the world’s second largest manufacturer of robotic vacuum cleaners.
But U.S. sales fell after tariffs in 2018.
“We had to shut down three of the 11 production lines and redirect employees from the three lines. We had to lay off about 200 of our workers, ”said Matsutek Deputy General Manager Terry Wu.
“In the European Union market, the penetration rate has been maintained at a stable range of 15 to 17 percent. But the penetration rate in China reached 1.7 percent, from 0.3 percent, in just two years. Thus, the growth rate in the Chinese region is much faster. “
The Chinese government is also focusing on domestic markets, while maintaining its engagement in international markets. Xi has repeatedly stressed that Chinese companies must now follow a new development strategy called “double circulation”.
The strategy – which envisions less reliance on global integration (first edition) and more on expanding domestic trade (second edition) – stems from Beijing’s belief that it is facing an increasingly protectionist world and a hostile external environment.
‘NEED TO WORK TOGETHER’
Still, China is too big a market to ignore.
It is Starbucks ’largest source of revenue outside the U.S., while General Motors sells more vehicles in China than in the U.S. Even the vast majority of Apple iPhones are assembled in China.
Survey data released by the U.S.-China Business Council in August found that up to 83 percent of its companies ranked China at the top or among the top five priorities of their global corporate strategy.
The trading group represents more than 200 U.S. companies doing business with China.
“(Both countries) need to work together,” Kimberley’s son, Grant, said. “One by itself won’t be as strong as they both work together.”
Meanwhile, U.S. President Joe Biden has said earlier that the U.S. must “become tougher” toward Beijing to counter intellectual property theft and abuse of trade.
Trade experts expect his administration to use tariffs to put pressure on China to facilitate access to its markets, reduce subsidies to state-owned companies and end other perceived unfair practices.
Amid political rhetoric, there is still hope for better days. Broderson hopes Xi’s memories of Muscatine can help fix rainfall.
“It’s easy for us to overlook some of those personal relationships that have evolved over the years,” she said. “They can be used and are actually crucial to (for) healing some of the larger wounds that exist in our world.”
Cheng agrees that there is a special Sino-American story in the city.
“Precisely because US-China ties are so bad, we need to preserve this piece of goodness and protect this rare story of friendship – to share it with citizens and the next generation,” he said. “We shouldn’t let it break.”
In areas such as climate change, peace in Afghanistan, the Middle East and North Korea, there is also hope that the two titans will work together, said James Green, a former trade adviser at the U.S. Embassy in Beijing.
Until then, Cheng and the rest of the world can only wait for salvos on both sides and hope for a return to normalcy.
Instead of a trade war, Lande wants to see the US “explore on our own” and “be the best” so we have a good chance of competing.
“There are problems we have, but I hope we will do it in a new way,” she said.
Watch this episode here When the Titans Clash.