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News from EPI The growing trade deficit with China eliminated 3.7 million U.S. jobs between 2001 and 2018

Two weeks after President Trump signed a “phase one” trade deal with China, a new EPI analysis shows that growing trade deficits with China cost 3.7 million U.S. jobs between 2001 and 2018, including 700,000 jobs lost in the first two years of the Trump administration.

Despite the tariffs and other restrictions imposed on China trade by the Trump administration, the bilateral trade deficit continued to grow between 2016 and 2018 because of the failure to address the fundamental flaws with the U.S.–China trade relationship.

Job losses occurred in all 50 states and in every congressional district, with the highest rates of job loss occurring in New Hampshire, Oregon, California, North Carolina, Minnesota, Massachusetts, Wisconsin, Vermont, Indiana, and Idaho—ranging from 2.81% to 3.66% of total state employment. The report is authored by EPI Director of Trade and Manufacturing Policy Research Robert E. Scott and Data Analyst Zane Mokhiber.

“The growing trade deficit has been driven by China’s history of currency manipulation and private investors bidding up the value of the U.S. dollar, making imports cheaper in the U.S. market and American-made goods more expensive for overseas consumers,” Scott said. “However, the Trump administration’s trade deal with China maintains an extremely unfavorable exchange rate and fails to address the key structural concerns responsible for the long-term trade imbalance, including China’s huge subsidies and massive excess capacity in a wide range of industries. This deal is nothing more than a gift to Wall Street and Beijing.”

Job losses have occurred in every industry, including sectors in which the United States has historically held a competitive advantage, but were concentrated in manufacturing. A staggering 2.8 million jobs—three-fourths of the total jobs lost in this time period—were in manufacturing. Additionally, global trade in advanced technology products has been dominated by China. Between 2001 and 2018, the trade deficit in the computer and electronic parts industry grew the most—leading to the loss of 1.3 million jobs, 36% of total job losses.

Supporters of China’s entry into the World Trade Organization in 2001 claimed that the move would create jobs and increase U.S. exports to China. However, China has continued to engage in unfair trade practices, which have limited the growth of U.S. exports. Meanwhile, growth in outsourcing by multinational companies has created a flood of Chinese imports into the United States, leading to rapidly growing trade deficits and corresponding job losses. The U.S. trade deficit with China has increased annually by $19.8 billion, or 10.0%, on average since 2001. Overall, the U.S trade deficit with China has grown from $83.0 billion in 2001 to $419.5 billion in 2018, an increase of $336.5 billion.

“A fundamental transformation of the U.S.–China trade relationship is long overdue,” said Thea Lee, president of EPI. “The top American trade priority must be to address the structural roots of the imbalanced and unfair trade relationship with China, including by ending currency misalignment and Chinese government subsidies to key industries. We need real dialogue with the Chinese government to make progress toward compliance with internationally recognized workers’ rights, ideally in coordination with our allies.”

The impact of the trade deficit with China is not limited to direct job losses. Competition with low-wage countries drives down wages and reduces bargaining power for millions of workers throughout the U.S. economy. Scott and Mokhiber find that trade with low-wage countries like China is largely responsible for reducing wages by nearly $2,000 per worker per year for all of the 100 million U.S. workers without college degrees. Most of that income was redistributed to corporations and to workers with college degrees at the top of the income distribution.

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