Economic Snapshot | Trade and Globalization

The Trade Deficit is Responsible for Manufacturing Job Loss

Growing trade deficits and the collapse of manufacturing output following the Great Recession are directly responsible for the loss of 5 million U.S. manufacturing jobs that occurred between 2000 and 2014. As the figure below shows, manufacturing started rapidly declining in 2000, just as the U.S. manufacturing trade deficit began to rise sharply. A rising trade deficit indicates that U.S. manufacturers are losing business to manufacturing industries in other countries like China and Japan, who manipulate their currency to make their goods cheaper and therefore more appealing to consumers in the United States and elsewhere. This leads to reduced demand for goods produced by U.S. manufacturers, both at home and abroad.

Economic Snapshot

The trade deficit is responsible for manufacturing job loss: U.S. manufacturing employment and manufacturing trade deficit, 1997–2014

Year Manufacturing employment (left axis) Manufacturing trade deficit (right axis)
1997 17.419 130.628
1998 17.56 186.527
1999 17.322 259.007
2000 17.263 317.237
2001 16.441 304.107
2002 15.259 362.64
2003 14.509 403.093
2004 14.315 487.44
2005 14.227 541.399
2006 14.155 558.533
2007 13.879 532.222
2008 13.406 456.24
2009 11.847 319.471
2010 11.528 412.74
2011 11.726 440.602
2012 11.927  458.667 
2013 12.006 448.056
2014 12.142 514.582
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Between 2000 and 2007, growing trade deficits in manufactured goods led to a loss of 2.6 million manufacturing jobs. When the Great Recession hit and consumers pulled back on their spending, the collapse in demand for U.S. manufactured goods caused a loss of 2.3 million additional manufacturing jobs. While in the past the manufacturing industry has typically regained most if not all jobs lost during a recession, manufacturing employment after the Great Recession has experienced an anemic recovery—only 900,000 of the 2.3 million jobs lost have been recovered since 2009. This is because the manufacturing trade deficit has skyrocketed since 2009 as a result of the rapid growth of imports from China and other currency manipulators. The manufacturing trade deficit grew from $319.5 billion in 2009 to $514.6 billion in 2014—very close to its pre-recession peak of $558.5 billion in 2006.

See related work on Trade deficit | Manufacturing | Trade

See more work by Will Kimball and Susan Balding