Post PNTR: 3.8 million Jobs Lost Due to China

Key Points

  • The trade deficit with China has cost the U.S. 3.82 million jobs since 2001.
  • Three-quarters of the job loss is concentrated in manufacturing, a total of 2.89 million manufacturing jobs lost. Job loss has been most concentrated in tradeable sectors. This has led to a decline of high paying jobs.
  • The state-by-state analysis below shows the number of jobs lost in each state and the percentage of those lost jobs which were in manufacturing.
  • Repealing Most-Favored Nation (MFN) status for China would revoke preferential treatment for Chinese imports and give American producers the space needed to rebuild American manufacturing capacity.

 

Trade Deficit with China Has Cost the U.S. Millions of Jobs

In 2001, China was granted permanent normal trade relations (PNTR) by the U.S. which gave permanent preferential treatment to Chinese manufactured goods and encouraged the offshoring of manufacturing. Since 2001, the trade deficit with China has grown by about $300 billion. The trade deficit with China is by far the largest the U.S. runs with any country in the world. In 2022, the $382.9 billion trade deficit with China accounted for 32% of the $1.19 trillion total U.S. trade deficit.

Numerous studies have shown that the trade deficit with China costs the U.S. millions of jobs throughout the economy. This analysis updates a previous study by the Economic Policy Institute (EPI). We use EPI’s sectoral breakdown of U.S. employment with current state employment figures, as of February 2023, from the Bureau of Labor Statistics (BLS) to give an updated estimate of how many jobs the trade deficit with China costs the U.S. economy.

We find that the U.S. has lost 3.82 million total jobs due to the trade deficit with China. Manufacturing accounts for 2.89 million jobs lost, 75% of the total job loss due to China.

As shown in Figure 1, regions are not impacted uniformly throughout the country. Regions that were manufacturing hubs prior to 2001 have lost the most jobs relative to other regions where the manufacturing industry makes up a smaller share of the overall state economy. Yet, all 50 states have had some degree of job loss due to the trade deficit with China as shown in Table 1 in the appendix.

States that have a large concentration of technology firms, such as California and Texas, lost a significant number of manufacturing jobs. China’s strategic focus on the export of computers and consumer electronics severely impacted domestic manufacturers in these industries. California has one of the highest rates of job displacement at 3.6%, or about 654,000 jobs, mostly due to the massive volume of imports of electronics from China.

 

Figure 1: Total Job Displacement Due to Trade Deficit with China Since 2001:

 

 

More Action Needed to Decouple from China

Over the past several decades, China has engaged in a strategic export-led development strategy to fuel its economic growth. Their abundance of low-cost labor coupled with state-subsidized production enabled Chinese firms to undercut U.S. manufacturers’ goods in the domestic market which has led to a trade deficit across several key manufacturing industries.

As shown in CPA’s Domestic Market Share Index (DMSI), China held 28% of the share of manufactured goods in the U.S. market of the computer and electronic parts and 26% of electrical equipment, appliances, and components. China has the majority share of apparel and leather products with 61% of the U.S. market for such goods. It also has a sizeable share of the domestic market for textiles (23%) and furniture (18%). Taken as a whole, the trade deficit with China has led to an erosion of American manufacturing capacity.

Recent efforts to decouple from China have shown some success. After imposition of the Section 301 tariffs, the bilateral trade deficit with China has shrunk by $35.3 billion from its peak in 2018. Yet, in many cases as a result of the tariffs, Chinese manufacturing firms merely relocated to other countries to continue to export goods to the U.S. The total goods trade deficit reached a record $1.19 trillion last year as other countries, most prominently Mexico and Vietnam, have increased their contribution to the trade deficit.

To reverse an overreliance on China and rebuild manufacturing capacity, the U.S. should continue to pursue decoupling. Advocates of free trade often cite the gains from trade that consumers attain in the form of cheaper consumer goods. This view ignores how long-run trade deficits erode manufacturing capacity and cause the loss of high-paying jobs that are replaced with low-quality jobs.

A repeal of Most-Favored Nation (MFN) status for China would no longer provide preferential treatment to Chinese manufactured goods and instead apply tariffs in Column 2 of the Harmonized Tariff Schedule to all imports from China. Such action would continue our decoupling from the Chinese economy and provide the space needed to rebuild American manufacturing.

 

Table 1: Total Job Loss Due to Trade Deficit with China by State

State State Employment* Jobs Lost Due to China Manufacturing Jobs Lost Manufacturing Job Loss as Percentage of Total
Alabama 2,139,400 52,843 42,290 80%
Alaska 326,500 2,775 1,961 71%
Arizona 3,147,800 70,196 51,381 73%
Arkansas 1,354,600 25,873 20,471 79%
California 17,969,600 654,093 487,230 74%
Colorado 2,887,700 70,749 51,182 72%
Connecticut 1,687,500 35,606 27,200 76%
District of Columbia 770,700 7,090 4,879 69%
Delaware 479,900 6,719 4,759 71%
Florida 9,681,900 161,688 115,319 71%
Georgia 4,875,800 130,184 98,360 76%
Hawaii 633,200 6,205 4,281 69%
Idaho 845,100 23,832 18,004 76%
Illinois 6,114,600 160,814 122,750 76%
Indiana 3,236,900 94,517 79,099 84%
Iowa 1,590,300 33,714 27,385 81%
Kansas 1,448,000 24,616 19,435 79%
Kentucky 1,991,900 48,204 38,474 80%
Louisiana 1,946,000 23,936 17,717 74%
Maine 646,800 11,966 9,034 75%
Maryland 2,725,300 40,062 28,464 71%
Massachusetts 3,735,800 115,810 84,965 73%
Michigan 4,416,400 109,527 88,505 81%
Minnesota 2,983,000 94,859 74,007 78%
Mississippi 1,179,700 28,667 22,806 80%
Missouri 2,962,000 58,055 44,594 77%
Montana 518,100 5,699 4,071 71%
Nebraska 1,043,300 17,110 13,191 77%
Nevada 1,537,700 20,451 14,600 71%
New Hampshire 699,500 25,602 19,772 77%
New Jersey 4,321,400 93,342 68,027 73%
New Mexico 862,800 11,303 7,960 70%
New York 9,682,000 189,767 135,459 71%
North Carolina 4,884,600 157,773 121,142 77%
North Dakota 434,400 5,517 4,046 73%
Ohio 5,575,500 138,830 110,062 79%
Oklahoma 1,728,200 31,108 23,277 75%
Oregon 1,989,600 72,421 55,636 77%
Pennsylvania 6,094,400 137,124 104,609 76%
Rhode Island 501,000 12,776 9,584 75%
South Carolina 2,278,100 60,370 47,368 78%
South Dakota 459,900 8,186 6,301 77%
Tennessee 3,310,500 81,438 63,578 78%
Texas 13,831,900 365,162 269,657 74%
Utah 1,712,000 41,088 31,188 76%
Vermont 307,500 9,010 6,892 76%
Virginia 4,131,200 71,470 52,123 73%
Washington 3,613,500 71,186 53,085 75%
West Virginia 699,500 9,373 6,890 74%
Wisconsin 2,997,400 90,521 75,301 83%
Wyoming 288,700 2,454 1,736 71%
Total 155,279,100 3,821,681 2,890,107 75%

Note: State employment figures from BLS Establishment Survey, February 2023

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