How the China trade shock impacted U.S. manufacturing workers and labor markets, and the consequences for U.S. politics

In the early 2000s, manufacturing-intensive communities in the United States entered a period of economic upheaval that would reshape their labor markets over the next two decades. China’s dramatic rise as the world’s leading exporter of manufactured goods, abetted by receipt of Permanent Normal Trade Relations from the United States in 2000 and accession to the World Trade Organization in 2001, exerted immense pressure on manufacturing in the United States and many other high-income countries. Entire industries—textiles, furniture, and home electronics among them—struggled to compete with surges of low-cost imports. In the United States, the China trade shock accounts for approximately onequarter of the decline in manufacturing jobs between 2000 and 2007. Although the aggregate loss of U.S. manufacturing jobs attributable to China’s changing competitive position in those 7 years—approximately 1.5 million to 2 million manufacturing jobs lost—is modest relative to the overall size of the U.S. labor market, these impacts are highly geographically concentrated, meaning that they loom large in places that specialize in producing the goods in which China rapidly gained global market share. While economists anticipated manufacturing workers in heavily China-shocked locations to encounter some difficulties in adjusting to changing labor market conditions over the course of their careers, the extent of the disruption and the slow and faltering pace of adjustment proved far more severe than expected. The economic distress brought on by the China trade shock reshaped the lives of U.S. workers and families in trade-exposed regions along multiple dimensions. Earnings for low-wage workers fell. Children became more likely to live in poor, singleparent households. And deaths of despair among working age-adults—primarily due to drug overdoses among men—increased. The profound economic and social consequences of the China trade shock shaped U.S. political preferences and electoral results. Across the country, tradeexposed regions became more likely to elect politicians from the right wing of the Republican party, often at the expense of moderate Democrats. The same trends are evident in European countries, where local exposure to Chinese import competition similarly favored nationalist and isolationist parties.