The new China Shock – Econlib

Debunking the Myth: Trade with China and Unemployment in America

There has been a prevalent belief that trade with China has led to increased unemployment in America. However, this notion is misguided. While imports from China did result in job losses in certain industries, the overall impact on the unemployment rate was negligible. In fact, for every job lost in one sector, new jobs were created in other industries.

Last year, China’s trade surplus surged to nearly a trillion dollars. According to Global Finance Magazine, if the conventional wisdom held true, China should be experiencing a manufacturing renaissance. Surprisingly, the opposite is happening—millions of manufacturing jobs are being shed, and China’s unemployment rate surpasses that of the United States.

The Financial Times has highlighted the widespread job losses across various manufacturing sectors in China:

The FT underscores that automation is the primary driver of job displacement in Chinese manufacturing. While some tasks are still performed by humans, the trend is towards increasing automation to boost efficiency and reduce labor costs.

In a similar vein, automation has been a key factor in the decline of manufacturing jobs in the United States. Regrettably, politicians have scapegoated trade for job losses, fueling the rise of nationalism globally. Contrary to popular belief, China’s substantial trade surplus has not translated into a surge in manufacturing employment. In fact, China has shed over 7 million manufacturing jobs since 2011.

An analysis of labor-intensive manufacturing industries in China between 2011 and 2019 revealed a significant decline in employment, particularly in sectors like textiles. The trend continued, with a further drop of 3.4 million jobs from 2019 to 2023.