A Pro-Worker Trade Policy to Fix the Affordability Crisis
KEY POINTS
Since 2000, Americans produced 65.6% more, but their pay rose just 23%.
Trade liberalization helped drive one of the largest upward wealth transfers in U.S. history: the bottom 90% lost nearly $79 trillion in income since 1975.
Cheap imports shaved prices on some goods but never made Americans richer. Wage losses and job destruction outweighed any discounts.
The biggest household costs—housing, healthcare, energy, insurance, education—kept rising and are not influenced by trade or tariffs.
Persistent trade deficits hollowed out manufacturing, pushed jobs into lower-paying services, and fueled debt and asset bubbles instead of paychecks.
A pro-worker trade policy uses strategic tariffs to bring production home, force investment into U.S. factories, and raise wages without requiring elite credentials.
The Problem We Pretend Not to See
Americans are told the affordability crisis is all about prices. Groceries cost too much. Rent is too high. Healthcare is unaffordable. Naturally, the solution is assumed to be lower prices—cheaper imports, cheaper labor, cheaper production.
But this approach also cheapens one of the most important things in the American economy: wages.
For decades, policymakers promised globalization would make life more affordable. That promise quietly assumed lower prices could substitute for rising incomes—an assumption that proved false once domestic production and wage growth stalled. It delivered some cheaper goods, but over time it failed to make Americans richer. Workers were told to celebrate lower prices while their paychecks stayed flat, their bargaining power eroded, and their economic security weakened. Inflation did not create this crisis. It merely exposed a deeper, long-running problem.
Policymakers also justified trade liberalization by claiming export growth would offset job losses and wage pressure. In reality, exports have never been large enough to carry that burden. U.S. exports only account for only about 11% of GDP [1], while the remaining economy depends on domestic production, employment, and investment. Trade agreements expanded import access far more than export opportunity, masking a national giveaway behind promises of export-led growth that never materialized for most workers.
The true cause is straightforward: real wages have been flat, income inequality has surged, and trade policy is a central reason why. When pay stops rising, every price increase becomes a crisis—and no discount can fix that.
Wages, Productivity, and Inequality
The data tell a stark story. For much of the post–World War II era, American workers shared in the gains of economic growth. Rising productivity translated into rising wages, and living standards improved broadly. That relationship began to fracture in the early 1990s and deteriorated rapidly by the late 1990s.
The divergence first accelerated in the 1990s, coinciding with the implementation of NAFTA and China’s rapid opening to foreign direct investment through export-processing zones and liberalization reforms. It then widened sharply in the early 2000s, just as China’s accession to the WTO and MFN status drove tariffs down to near-duty-free levels across most manufactured goods, intensifying offshoring and import competition.
FIGURE 1
From Q1 2000 to Q3 2025, labor productivity rose by 65.6%, while real compensation increased by only 23%. In plain terms, Americans produced 65% more—but were paid only 23% better. Someone else kept the difference.
This “productivity–pay gap” reflects how the gains from growth have been distributed. Workers are producing far more value than they are compensated for, while the remainder flows to corporate profits, executives, and capital returns. The result is a bifurcated economy: a narrow upper tier capturing most of the gains, and a broad middle and working class left treading water.
Even when wages rise modestly, the benefits are also concentrated at the top. As shown in Figure 2, since 1967 the bottom 20% of earners saw real income growth of roughly 50%, and the middle 20% about 55%. Over the same period, the top 5% saw their incomes rise by 159%.
FIGURE 2
These outcomes were not accidental. They were the direct result of policy choices that exposed American workers to low-wage competition, encouraged offshoring, shut down domestic factories, and weakened labor standards—while rewarding firms that relocated production and suppressed wages.
Over the same period that trade liberalization accelerated, income growth at the very top outpaced gains for working Americans by orders of magnitude. According to RAND, had incomes grown as evenly as in earlier decades, the bottom 90% of workers would have earned roughly $3.9 trillion more in 2023 alone—and nearly $79 trillion cumulatively since 1975—representing one of the largest upward redistributions of income in modern U.S. history [2].
These gains were also highly concentrated. The largest 1% of U.S. trading firms account for more than 80% of total trade activity, and most are major importers as well as exporters [3]. Liberalized trade delivered outsized benefits to multinational corporations, while smaller domestic producers and their workers bore the costs—making the upward redistribution of income a structural feature of trade policy, not an unintended side effect.
Why Wage Suppression Matters for Affordability
When wages stagnate, every price increase becomes harder to absorb. Inflation is manageable when incomes rise alongside it, but it becomes a crisis when they do not. That has been the American experience for decades.
Even as workers produced more value per hour, most saw little improvement in purchasing power. Households struggled to cover essential costs—electricity, housing, healthcare, childcare, transportation—all areas largely untouched by cheaper imports or tariffs.
As shown in Figure 3, energy, medical, and healthcare costs were among the largest contributors to inflation in 2025, even after tariffs were imposed on imported goods.
America’s affordability crisis is not a tariff problem or even a price problem. It is a wage and structural problem.
FIGURE 3
Even if some goods did become slightly cheaper with imports, they did not remotely compensate for slower wage growth. Goods related to global trade make up a shrinking share of household spending. Imported goods only account for 11.2% of GDP [4]. Real economic growth is built by not just consuming in America but by hiring and producing in America as well.
Meanwhile, the costs that dominate family budgets—housing, healthcare, energy, insurance, and education—are largely unaffected by trade or tariffs. Lower prices on televisions and clothing cannot offset decades of wage stagnation and rising essential costs in energy, healthcare, and housing. Affordability is determined by income security, not discount pricing.
Flat wages also shifted the consumption burden onto household debt, dual incomes just to make ends meet, and declining savings. American household debt has increased by $4.28 trillion (30%) since 2020 [5]. Americans are increasingly being forced to rely on debt because real wages are not giving many enough to even maintain their current standard of living.
Trade Policy, Bargaining Power, and Wage Outcomes
One of the clearest drivers of wage stagnation has been U.S. trade policy itself.
Free trade agreements emphasized market access, cheaper imports, and investor protections, while offering little protection for American workers. They facilitated a race to the bottom, forcing U.S. workers to compete against labor in developing countries with far lower wages, weaker standards, and state-backed industrial policies.
This was an impossible competition. It pushed Americans out of work or forced them to accept stagnating wages and declining standards of living.
The job losses were not theoretical. Between 1999 and 2011, rising import competition from China displaced an estimated 2.0 to 2.4 million U.S. jobs [6]. NAFTA produced a similar pattern, resulting in a net loss of roughly 1 million American jobs within its first decade [7]. Export gains failed to offset these losses, leaving entire regions permanently deindustrialized.
FIGURE 4
Large and persistent trade deficits left the United States dependent on foreign capital inflows, putting sustained upward pressure on the dollar. A stronger dollar made U.S. manufacturing less competitive and encouraged offshoring over domestic investment. To sustain growth in the absence of production growth, the economy increasingly relied on debt expansion, asset inflation, and a shift toward lower-wage service-sector activity. This reallocation moved many Americans out of higher-paying manufacturing jobs and into services.
At its core, modern trade policy institutionalized a fundamental imbalance: capital gained global mobility while labor remained rooted to place. Multinational firms could relocate production at will; American workers could not and were left behind. The result was a sharp erosion of bargaining power and prosperity for American workers, but a steady rise in returns to capital for multinational corporations.
NAFTA and China’s MFN status were the two largest drivers that enabled firms to leverage global labor surplus against U.S. workers, suppressing middle-class wages while enriching executives and shareholders through offshoring and labor arbitrage. These policies prioritized corporate shortcuts, financialization, and cheap imports over domestic production, wage growth, and long-term prosperity.
The Case for a Pro-Worker Trade Policy
A pro-worker trade policy restores balance by making wage growth—not corporate cost cutting—the foundation of competitiveness. It does not mean abandoning trade. It means rejecting the illusion that cheap imports alone make a country richer and instead prioritizing investment in productive industries that create middle- and upper-middle-income jobs.
Cheap imports at big-box retailers did not raise American living standards. Building cars, steel, energy infrastructure, advanced manufacturing, and emerging technologies did. A pro-worker trade policy focuses on expanding domestic production in sectors that pay well and anchor regional economies, including and especially for those without advanced degrees.
Targeted tariffs are essential to this strategy—not as a tax on consumers, but as a tool to deter import dependence and offshore investment. By protecting critical and jobs supporting industries from import surges, tariffs create the conditions under which domestic producers expand capacity, source locally, and capital flows back into U.S. factories rather than offshore supply chains.
When firms have real incentives to build and produce in the United States, labor demand rises and employers must compete for workers, reversing decades of downward pressure on wages. Rebalanced trade strengthens supply-chain resilience, aligns economic policy with national security priorities, and ensures workers share in the gains they help create.
American trade policy over the past decades worked exactly as designed. It rewarded offshoring, financial engineering, and short-term cost arbitrage—while leaving working Americans to absorb the consequences. A pro-worker trade policy corrects that mistake by insisting that the U.S. economy reward production, investment, and work done here at home.
[7] Economic Policy Institute, Growing Trade Deficits with China and NAFTA Countries Have Cost Millions of U.S. Jobs, Issue Brief No. 214, 2011. https://www.epi.org/publication/ib214/
MADE IN AMERICA.
CPA is the leading national, bipartisan organization exclusively representing domestic producers and workers across many industries and sectors of the U.S. economy.
Cheap Imports Are Making America Poorer
A Pro-Worker Trade Policy to Fix the Affordability Crisis
KEY POINTS
The Problem We Pretend Not to See
Americans are told the affordability crisis is all about prices. Groceries cost too much. Rent is too high. Healthcare is unaffordable. Naturally, the solution is assumed to be lower prices—cheaper imports, cheaper labor, cheaper production.
But this approach also cheapens one of the most important things in the American economy: wages.
For decades, policymakers promised globalization would make life more affordable. That promise quietly assumed lower prices could substitute for rising incomes—an assumption that proved false once domestic production and wage growth stalled. It delivered some cheaper goods, but over time it failed to make Americans richer. Workers were told to celebrate lower prices while their paychecks stayed flat, their bargaining power eroded, and their economic security weakened. Inflation did not create this crisis. It merely exposed a deeper, long-running problem.
Policymakers also justified trade liberalization by claiming export growth would offset job losses and wage pressure. In reality, exports have never been large enough to carry that burden. U.S. exports only account for only about 11% of GDP [1], while the remaining economy depends on domestic production, employment, and investment. Trade agreements expanded import access far more than export opportunity, masking a national giveaway behind promises of export-led growth that never materialized for most workers.
The true cause is straightforward: real wages have been flat, income inequality has surged, and trade policy is a central reason why. When pay stops rising, every price increase becomes a crisis—and no discount can fix that.
Wages, Productivity, and Inequality
The data tell a stark story. For much of the post–World War II era, American workers shared in the gains of economic growth. Rising productivity translated into rising wages, and living standards improved broadly. That relationship began to fracture in the early 1990s and deteriorated rapidly by the late 1990s.
The divergence first accelerated in the 1990s, coinciding with the implementation of NAFTA and China’s rapid opening to foreign direct investment through export-processing zones and liberalization reforms. It then widened sharply in the early 2000s, just as China’s accession to the WTO and MFN status drove tariffs down to near-duty-free levels across most manufactured goods, intensifying offshoring and import competition.
FIGURE 1
From Q1 2000 to Q3 2025, labor productivity rose by 65.6%, while real compensation increased by only 23%. In plain terms, Americans produced 65% more—but were paid only 23% better. Someone else kept the difference.
This “productivity–pay gap” reflects how the gains from growth have been distributed. Workers are producing far more value than they are compensated for, while the remainder flows to corporate profits, executives, and capital returns. The result is a bifurcated economy: a narrow upper tier capturing most of the gains, and a broad middle and working class left treading water.
Even when wages rise modestly, the benefits are also concentrated at the top. As shown in Figure 2, since 1967 the bottom 20% of earners saw real income growth of roughly 50%, and the middle 20% about 55%. Over the same period, the top 5% saw their incomes rise by 159%.
FIGURE 2
These outcomes were not accidental. They were the direct result of policy choices that exposed American workers to low-wage competition, encouraged offshoring, shut down domestic factories, and weakened labor standards—while rewarding firms that relocated production and suppressed wages.
Over the same period that trade liberalization accelerated, income growth at the very top outpaced gains for working Americans by orders of magnitude. According to RAND, had incomes grown as evenly as in earlier decades, the bottom 90% of workers would have earned roughly $3.9 trillion more in 2023 alone—and nearly $79 trillion cumulatively since 1975—representing one of the largest upward redistributions of income in modern U.S. history [2].
These gains were also highly concentrated. The largest 1% of U.S. trading firms account for more than 80% of total trade activity, and most are major importers as well as exporters [3]. Liberalized trade delivered outsized benefits to multinational corporations, while smaller domestic producers and their workers bore the costs—making the upward redistribution of income a structural feature of trade policy, not an unintended side effect.
Why Wage Suppression Matters for Affordability
When wages stagnate, every price increase becomes harder to absorb. Inflation is manageable when incomes rise alongside it, but it becomes a crisis when they do not. That has been the American experience for decades.
Even as workers produced more value per hour, most saw little improvement in purchasing power. Households struggled to cover essential costs—electricity, housing, healthcare, childcare, transportation—all areas largely untouched by cheaper imports or tariffs.
As shown in Figure 3, energy, medical, and healthcare costs were among the largest contributors to inflation in 2025, even after tariffs were imposed on imported goods.
America’s affordability crisis is not a tariff problem or even a price problem. It is a wage and structural problem.
FIGURE 3
Even if some goods did become slightly cheaper with imports, they did not remotely compensate for slower wage growth. Goods related to global trade make up a shrinking share of household spending. Imported goods only account for 11.2% of GDP [4]. Real economic growth is built by not just consuming in America but by hiring and producing in America as well.
Meanwhile, the costs that dominate family budgets—housing, healthcare, energy, insurance, and education—are largely unaffected by trade or tariffs. Lower prices on televisions and clothing cannot offset decades of wage stagnation and rising essential costs in energy, healthcare, and housing. Affordability is determined by income security, not discount pricing.
Flat wages also shifted the consumption burden onto household debt, dual incomes just to make ends meet, and declining savings. American household debt has increased by $4.28 trillion (30%) since 2020 [5]. Americans are increasingly being forced to rely on debt because real wages are not giving many enough to even maintain their current standard of living.
Trade Policy, Bargaining Power, and Wage Outcomes
One of the clearest drivers of wage stagnation has been U.S. trade policy itself.
Free trade agreements emphasized market access, cheaper imports, and investor protections, while offering little protection for American workers. They facilitated a race to the bottom, forcing U.S. workers to compete against labor in developing countries with far lower wages, weaker standards, and state-backed industrial policies.
This was an impossible competition. It pushed Americans out of work or forced them to accept stagnating wages and declining standards of living.
The job losses were not theoretical. Between 1999 and 2011, rising import competition from China displaced an estimated 2.0 to 2.4 million U.S. jobs [6]. NAFTA produced a similar pattern, resulting in a net loss of roughly 1 million American jobs within its first decade [7]. Export gains failed to offset these losses, leaving entire regions permanently deindustrialized.
FIGURE 4
Large and persistent trade deficits left the United States dependent on foreign capital inflows, putting sustained upward pressure on the dollar. A stronger dollar made U.S. manufacturing less competitive and encouraged offshoring over domestic investment. To sustain growth in the absence of production growth, the economy increasingly relied on debt expansion, asset inflation, and a shift toward lower-wage service-sector activity. This reallocation moved many Americans out of higher-paying manufacturing jobs and into services.
At its core, modern trade policy institutionalized a fundamental imbalance: capital gained global mobility while labor remained rooted to place. Multinational firms could relocate production at will; American workers could not and were left behind. The result was a sharp erosion of bargaining power and prosperity for American workers, but a steady rise in returns to capital for multinational corporations.
NAFTA and China’s MFN status were the two largest drivers that enabled firms to leverage global labor surplus against U.S. workers, suppressing middle-class wages while enriching executives and shareholders through offshoring and labor arbitrage. These policies prioritized corporate shortcuts, financialization, and cheap imports over domestic production, wage growth, and long-term prosperity.
The Case for a Pro-Worker Trade Policy
A pro-worker trade policy restores balance by making wage growth—not corporate cost cutting—the foundation of competitiveness. It does not mean abandoning trade. It means rejecting the illusion that cheap imports alone make a country richer and instead prioritizing investment in productive industries that create middle- and upper-middle-income jobs.
Cheap imports at big-box retailers did not raise American living standards. Building cars, steel, energy infrastructure, advanced manufacturing, and emerging technologies did. A pro-worker trade policy focuses on expanding domestic production in sectors that pay well and anchor regional economies, including and especially for those without advanced degrees.
Targeted tariffs are essential to this strategy—not as a tax on consumers, but as a tool to deter import dependence and offshore investment. By protecting critical and jobs supporting industries from import surges, tariffs create the conditions under which domestic producers expand capacity, source locally, and capital flows back into U.S. factories rather than offshore supply chains.
When firms have real incentives to build and produce in the United States, labor demand rises and employers must compete for workers, reversing decades of downward pressure on wages. Rebalanced trade strengthens supply-chain resilience, aligns economic policy with national security priorities, and ensures workers share in the gains they help create.
American trade policy over the past decades worked exactly as designed. It rewarded offshoring, financial engineering, and short-term cost arbitrage—while leaving working Americans to absorb the consequences. A pro-worker trade policy corrects that mistake by insisting that the U.S. economy reward production, investment, and work done here at home.
REFERENCES
[1] World Bank, Exports of Goods and Services (% of GDP), United States, World Bank Open Data, 2024.
https://data.worldbank.org/indicator/NE.EXP.GNFS.ZS?locations=US
[2] RAND Corporation, Trends in Income Inequality and the Economic Well-Being of U.S. Households, Working Paper WRA516-2, 2024.
https://www.rand.org/pubs/working_papers/WRA516-2.html
[3] World Economic Forum, This Is the Impact of Global Firms on Trade, January 2017.
https://www.weforum.org/stories/2017/01/this-is-the-impact-of-global-firms-on-trade/
[4] Federal Reserve Bank of St. Louis, Shares of Gross Domestic Product: Imports, FRED Economic Data, 2024.
https://fred.stlouisfed.org/series/A255RE1A156NBEA
[5] Federal Reserve Bank of New York, Household Debt and Credit Report, Center for Microeconomic Data, 2024.
https://www.newyorkfed.org/microeconomics/hhdc
[6] National Bureau of Economic Research, Import Competition and the Great U.S. Employment Sag of the 2000s, Working Paper No. 20395, August 2014.
https://www.nber.org/system/files/working_papers/w20395/w20395.pdf
[7] Economic Policy Institute, Growing Trade Deficits with China and NAFTA Countries Have Cost Millions of U.S. Jobs, Issue Brief No. 214, 2011.
https://www.epi.org/publication/ib214/
MADE IN AMERICA.
CPA is the leading national, bipartisan organization exclusively representing domestic producers and workers across many industries and sectors of the U.S. economy.
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