*By Carlo Versano* *Updated 5:04 p.m. ET, July 2, 2019* Tuesday was supposed to be a day to show off an iconic American company doubling down on its domestic manufacturing. Nike ($NKE) and the governor of Arizona were set to announce a major partnership to build a plant in the Phoenix suburb of Goodyear, where Nike planned to produce its Air sneaker line. Nike was to kick in $184.5 million for the first phase of the facility, which would employ more than 500 Arizonans full time to manufacture the popular shoes. But by early morning, the plan was in tatters ー a victim of America's explosive culture wars, touching on race, history, and political correctness in a deeply divided country, just as the country prepares to celebrate its 243rd birthday. The unraveling of the plan to bring Nike to Arizona began with a Wall Street Journal [article](https://www.wsj.com/articles/nike-nixes-betsy-ross-flag-sneaker-after-colin-kaepernick-intervenes-11562024126?mod=hp_lead_pos3) late Monday, in which it was reported that the shoe giant had pulled a special edition of its Air Max sneakers from store shelves on the advice of Colin Kaepernick, the former NFL quarterback-turned-activist, who objected to the shoe's use of the original Betsy Ross flag on its heel. Kaepernick reportedly voiced his concern to Nike that the flag ー which was approved by the Continental Congress in 1777 and features 13 stars in a circle to represent the first 13 American colonies ー is offensive due to its connection to an era of slavery. In recent years, the flag has been co-opted by the [Patriot movement](https://www.washingtonpost.com/sf/national/2016/05/21/armed-with-guns-and-constitutions-the-patriot-movement-sees-america-under-threat/?utm_term=.8bb93da38942), a loose collection of anti-government nationalist groups and militias. Unhappy with Nike's decision to pull the shoe, Arizona Gov. Doug Ducey reacted in kind. In a series of [tweets](https://twitter.com/dougducey/status/1145980544909340672) Tuesday morning, Ducey, a Republican, said he had ordered the state's commerce authority to pull any financial incentives that Arizona was offering Nike for the Goodyear plant. The Journal reported that those incentives were approved on Monday, and included $1 million in reimbursements as well as another $4,000 for every full-time employee hired. Ducey said he was "embarrassed for Nike" for "\[bowing\] to the current onslaught of political correctness and historical revisionism." "Arizona's economy is doing just fine without Nike. We don't need to suck up to companies that consciously denigrate our nation's history," Ducey wrote on Twitter. "NIKE made the decision to halt distribution of the Air Max 1 Quick Strike Fourth of July based on concerns that it could unintentionally offend and detract from the nation's patriotic holiday," said the company in a statement. "Nike is a company proud of its American heritage and our continuing engagement supporting thousands of American athletes including the US Olympic team and US Soccer teams." Nike emphasized that it already has 35,000 employees based in the U.S., and pointed to a new manufacturing center that should bring hundreds more jobs. Pairs were set to retail at $125 before Nike pulled them. "I don't think the state should be regulating anyone's speech. Nike is a private company. They can do what they want. And Doug Ducey, as a state governor, can do what he wants for his state," Rachel Bovard, policy director of the Conservative Partnership Institute, told Cheddar. "But I think a lot of people are offended by the idea that Colin Kaepernick can just declare a part of our history racist." It isn't the first time in recent American history that the Betsy Ross flag sparked controversy. In 2016, students at a predominantly white Michigan high-school were castigated for waving the flag alongside a Donald Trump banner at a game against a predominantly black school. The school superintendent publicly apologized, calling the flag a symbol of ["exclusion and hate."](https://www.washingtonpost.com/news/morning-mix/wp/2016/09/15/does-americas-first-flag-symbolize-exclusion-and-hate-like-this-mich-school-superintendent-said/?utm_term=.c7b1d9d27697). By midday Tuesday, pairs of the hard-to-come-by sneakers were selling for up to $2,500 on the secondary market [StockX](https://stockx.com/nike-air-max-1-usa-2019), until its executives decided to pull the shoes from trading because, they said, it does not align with their "value system."

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