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News from EPI The growing trade deficit with China has led to a loss of 3.4 million U.S. jobs between 2001 and 2017

In a new analysis, EPI Senior Economist Robert E. Scott and Research Assistant Zane Mokhiber show that the growing goods trade deficit with China cost 3.4 million U.S. jobs between 2001 and 2017. Losses occurred in all 50 states and in every congressional district, with job losses in the hardest-hit states—including New Hampshire, Oregon, California, Minnesota, North Carolina, Rhode Island, Massachusetts, Vermont, Wisconsin, and Texas—ranging from 2.57 percent to 3.55 percent of total state employment.

“The U.S.–China trade relationship needs to undergo a fundamental change,” said Scott. “Addressing unfair trade, weak labor, and environmental standards in China, and, especially, ending currency manipulation and misalignment should be our top trade and economic priorities with regard to China.”

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 loss. The U.S. trade deficit with China has increased annually by $18.3 billion, or 9.9 percent, on average since 2001. Overall, the U.S. goods trade deficit with China has grown by $292.2 billion, to $375.2 billion in 2017.

Scott and Mokhiber calculate the impacts of the trade deficit with China using a standard input-output model including 205 U.S. industries, which estimates the direct and indirect labor requirements of producing output in a given domestic industry.

Job losses have occurred throughout the country and in every industry, but were concentrated in manufacturing, including sectors in which the United States has traditionally held a competitive advantage. 2.5 million jobs, nearly three-fourths of the total jobs lost, were in manufacturing. Global trade in advanced technology products is dominated by China. Between 2001 and 2017, the trade deficit in the computer and electronic parts industry grew the most—leading to the loss of 1.2 million jobs, 36.0 percent of total job losses.

“Trade with China has redistributed vastly more income from working Americans to those at the top, than it has created through any increases in economic efficiency,” said Scott. “The first priority for American trade and financial policy should be to eliminate the soaring trade deficits we have with China and other countries with persistent, global trade surpluses, by lowering the value of the dollar through currency realignment.”

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 non-college-educated workers in the United States. Most of that income was redistributed to corporations and to workers with college degrees at the top of the income distribution.