WASHINGTON — A new economic analysis by the Coalition for a Prosperous America (CPA) found that revoking China’s Most Favored Nation (MFN) status would result in the creation of 2 million new American jobs, increase real household incomes by $3,647, and increase real gross domestic product (GDP) by 1.75%. Earlier this month, CPA published a comprehensive economic analysis of 927 U.S. cities and towns that shows that job loss in manufacturing due to China imports since 2001 has affected almost every community in the U.S., including towns and cities in all 50 states. The trade deficit with China, also known as the “China Shock”, has cost the U.S. 3.4 million manufacturing jobs since 2001.
“Granting China MFN status was a terrible decision that has directly resulted in the loss of millions of American jobs and the closure of countless factories, hitting communities in every single state in the U.S.,” said Zach Mottl, Chairman of CPA. “Despite granting China this status, the CCP continues to wage economic warfare on American workers and businesses, and Beijing’s Orwellian, authoritarian tactics have only continued to get worse. As Congress continues to work on policies that increase U.S. domestic manufacturing and decrease U.S. dependence on China, it is clear that lawmakers must pass legislation to revoke China’s MFN status.”
A March 2023 report from the U.S. International Trade Commission (USITC) showed that the Section 301 and 232 tariffs boosted U.S. domestic production in all twelve of the industries studied. Contrary to the false narrative by free traders and globalists that tariffs drastically increase consumer prices, the USITC report found that price increases in the product categories targeted with tariffs were very small, in the 3%-4% range. Most of the tariffs targeted intermediate (industrial) goods. Downstream goods, including consumer goods, saw barely visible tariff-related price increases.
“CPA’s economic analysis on revoking China’s MFN status finds that further decoupling from China would grow the U.S. economy, and result in higher incomes and more jobs for Americans and the rebuilding of many critical manufacturing sectors,” said Andrew Heritage, CPA’s Senior Economist. “CPA’s Pro-Growth model is based on real-world evidence of how tariffs expand economic output and allow firms to respond to the increase in domestic demand by increasing investment and creating new jobs.”
Removing China’s MFN Status
In 2001, China was granted MFN status indefinitely, giving permanent preferential treatment to Chinese manufactured goods. Since 2001, the annual U.S. goods trade deficit with China has grown by $299.2 billion and amounts to a cumulative total of $6.1 trillion of goods deficits.
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. As our research shows, this has cost 3.4 million American manufacturing jobs since 2001. China has strategically undercut American firms with low-cost labor and government subsidy which has been the leading cause of the de-industrialization of the U.S. economy.
To analyze the impact the removal of China’s MFN status would have on the U.S. economy, the CPA Economics Team used CPA’s Pro-Growth model to show the effects of imposing Column 2 tariffs on China, using the relevant Column 2 tariffs for each sector. Removing a country’s MFN status is not unprecedented as the U.S. removed Russia’s preferential trade status last year.
Related Economic Analysis from CPA
