There’s a widespread perception that trade with China caused increased unemployment in America. This is false. Imports from China did reduce jobs in some industries, but this did not have any effect on the overall unemployment rate, as even more jobs were generated in other industries.
Last year, the Chinese trade surplus rose to nearly a trillion dollars. If the mercantilists were correct, then China should be experiencing a boom in manufacturing employment. In fact, just the opposite is occurring—millions of manufacturing jobs are being lost and China’s unemployment rate is higher than ours.
The Financial Times reports that jobs are being lost in a wide range of manufacturing industries:
The FT points out that while some jobs have migrated to other East Asian countries, the main issue is automation:
Manufacturing is far from dead in China, however. In a factory in Panyu on the outskirts of Guangzhou, humans work in synchronisation with machines to churn out new electric vehicles every 53 seconds. . . .
But in parts of the line — such as when seven robots lift, rotate and fit windscreens on chassis passing on a conveyor belt — humans are vastly outnumbered by machines.
Other tasks, such as the hazardous welding and coating of car doors are entirely automated, while the overall automation rate of the final assembly process is about 40 per cent.
That is by design, says Li Xiaoyu, an engineer: the factory has a goal of reducing its human workforce by 10 per cent a year.
Automation was also the primary cause of job loss in US manufacturing. Unfortunately, politicians have blamed the job loss on trade, and this has contributed to the global rise in nationalism. If trade really were the issue, then China’s vast trade surplus would be generating lots on manufacturing jobs. Instead, they’ve lost over 7 million such jobs, just since 2011:
Analysis of 12 labour-intensive manufacturing industries between 2011 and 2019 by academics at Changzhou University, Yancheng Teachers University and Henan University found that average employment shrank by roughly 14 per cent, or nearly 4mn roles, between 2011 and 2019. Roles in the textile industry shrank 40 per cent over the period.
An FT analysis of the same 12 sectors between 2019 and 2023 found a further decline of 3.4mn jobs..
READER COMMENTS
Thomas L Hutcheson
Mar 26 2025 at 10:38pm
Do you put any importance on the Stolper-Samuelson idea that increased trade with a labor abundant economy could be bad for labor in a relatively labor scarce economy?
Scott Sumner
Mar 27 2025 at 6:26pm
I think that’s very unlikely. I don’t even like the “labor” and “capital” dichotomy—it doesn’t conform to the real world
Travis Allison
Mar 27 2025 at 7:42pm
That sounds interesting! Maybe you could write a blog post about your disagreement with Stolper-Samuelson, and the labor and capital dichotomy.
Don Boudreaux
Mar 28 2025 at 6:52am
On Stolper-Samuelson: Samuelson himself, in his textbook, wrote:
And, if I may, explained here are some other, more realistic considerations.
Warren Platts
Mar 28 2025 at 6:36pm
Samuelson was a globalist, but he was at least self-aware enough to know **and say** that the globalization was going to result in “Antionetteish” consequences (his words) for American workers. The justification was that immiserating American workers was worth bringing a billion foreigners out of poverty. That’s a moral argument one can make. I guess Don could say that bringing a billion foreigners out of poverty will help my American grandchildren. The MAGA response is that we’ve done enough charity. The ROW can take care of itself now.
Jon Murphy
Mar 28 2025 at 7:41am
My two cents:
I don’t find Stolper-Samuelson that useful of a model in most situations. The assumptions are too strong. I like the Specific Factors model more.
steve
Mar 27 2025 at 11:27am
The people claiming that they know how to bring back the good jobs ie manufacturing to the US claim we will compete with lower Chinese labor costs by automating. They dont seem to realize that China is automating. Even if we achieved better, cheaper automation that China so that making stuff here is cheaper its not bringing back a lot fo jobs and especially not for those with a high school or less education.
Steve
Warren Platts
Mar 28 2025 at 6:48pm
Sorry, but that is flatly not true. That is a myth. U.S. manufacturing labor productivity has been flat for decades now. Automation is exactly what we want actually.
Jon Murphy
Mar 30 2025 at 11:55am
1) As a factual matter, it is incorrect that us manufacuturing labor productivity “has been flat for decades now.” Only the last 10 years or so. Indeed, productivity skyrocketed during the so-called “China Shock.” That is why just about everyone who studies the decline in US manufacturing employment points to automation. The data are quite unambigious. (See BLS, PRS30006163)
2) There is a strong, statistically significant negative correlation between tariffs and manufacturing worker productivity (-0.68). Indeed, this is seen in the most recent trade war as well: US manufacturing worker productivity took a beating once tariffs were imposed in Trump’s first term. (Data from Tax Foundation, BLS, and author calculations)
So, if you want automation (which, Trump has his team have explictly said they do not want), you should oppose tariffs.
Warren Platts
Mar 31 2025 at 12:09am
OK fine, I will stipulate for the sake of the argument that you are correct. But you just proved my point. If automation is what is destroying manufacturing employment, then manufacturing labor productivity should be skyrocketing, but it’s not…
Warren Platts
Mar 31 2025 at 12:34am
There are about three different ways to grow the GDP: (1) just add population through mass immigration; (2) just worker harder and more hours and don’t retire when you’re 70 years old; (3) automation.
Warren Platts
Mar 31 2025 at 12:43am
And they got like way over 100 million manufacturing workers to begin with. So if they lose 7 million, I guess that’s a hit, but not a big one.. Certainly not compared to the American debacle.
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