The Real Story of the ‘China Shock’
The jobs harm was largely local and temporary, while overall jobs and consumer welfare increased.
May 27, 2025 The Wall Street Journal
Few academic papers have been as influential—or as misunderstood—as those by David Autor, David Dorn and Gordon Hanson. Politicians and pundits often use these authors’ papers to claim that China’s rise has cost the U.S. up to 2.4 million jobs due to surging Chinese imports between 1999 and 2011. But these studies focus narrowly on what happened to manufacturing employment in local labor markets, not the U.S. as a whole.
It’s true that communities exposed to heavy Chinese import competition saw steep drops in manufacturing jobs and a rise in local unemployment. Crucially, the displaced workers mostly stayed put rather than moved for new work. It’s no wonder these academic papers resonated because they highlighted real pain in America’s industrial heartland. But treating the China shock as a verdict on national employment is a mistake.
There is growing evidence that, while Chinese imports did hammer certain regions, they didn’t cause large net job losses across the entire U.S. Recent research from the National Bureau of Economic Research finds that job losses locally were mostly balanced by job gains in other regions. Manufacturing-heavy areas in the Midwest and South saw employment declines, but services jobs sprouted in coastal and high-tech hubs like the West Coast and Northeast. Import competition shifted jobs rather than eliminated them.
By analyzing supply chains, researchers have found that the China shock slightly increased total U.S. employment from 2000 to 2007. Cheaper imports reduced costs for businesses and consumers, which stimulated demand and job growth in other sectors. On average there was a net employment gain of 1.27% in each region exposed to Chinese trade, alongside wage gains, when accounting for broader effects. Remarkably, even in some communities hit hardest by import competition, the overall employment effect was positive once new service jobs are counted.
None of this means that manufacturing workers caught in the transition didn’t experience hardship. Those who lost good factory jobs often struggle. Many didn’t relocate. The tragedy of the China shock is largely local.
But the total number of jobs remained largely stable in the U.S.—and even slightly increased—as people adapted to competition from Chinese trade. Trade-exposed places recovered after 2010, primarily by adding young-adult workers, foreign-born immigrants, women and the college-educated to service-sector jobs.
Lost in the alarm over jobs is that trade with China delivered substantial benefits to the U.S. economy. Most obvious are the lower prices Americans pay for everything from clothing and electronics to furniture. One study found that a 1 percentage point increase in imports from China led to about a 1.9% drop in consumer prices in the U.S. For every factory job lost to Chinese competition, American consumers in aggregate gained an estimated $411,000 in consumer welfare. This so-called Walmart effect disproportionately helped middle- and lower-income families, who spend a bigger share of their budget on the kinds of cheap goods China excels at producing.
U.S. businesses also reaped advantages. Manufacturers who use imported parts or materials benefited from cheaper inputs, making them more competitive globally. An American appliance company, for example, could buy low-cost Chinese components to lower its production costs, keep its product prices down and potentially hire more workers. Most China shock studies don’t consider these positive effects on producers or consumers, but any fair accounting of China’s influence on the U.S. must include them.
It’s important to view the China shock in context with another powerful force reshaping manufacturing: automation. Even if the U.S. had somehow cut itself off from Chinese imports, many factory jobs would have vanished regardless—replaced by machines and software.
Nobel laureate economist Daron Acemoglu and co-author Pascual Restrepo found that the adoption of industrial robots in the U.S. from 1990 to 2007 led to a loss of 360,000 to 670,000 jobs. The number of industrial robots operating in the U.S. and Western Europe increased fourfold from 1993 to 2007.
Another often-cited analysis found that about 88% of the manufacturing jobs lost in the 2000s were eliminated by productivity growth including that from automation. Whether a task is done by a machine in Ohio or by a low-wage worker in Beijing, fewer Americans are needed to produce the same output.
The danger of blaming Chinese trade is that the U.S. is misdiagnosing the problem and pursuing the wrong solutions. While tariffs on Chinese goods might bring back a few factory jobs, they will raise prices for everyone and hurt U.S. businesses that rely on imports. Current attempts to turn back the clock by introducing tariffs are a costly remedy for a poorly understood ailment.
Mr. Heckman is an economics professor at the University of Chicago, a senior fellow at the Archbridge Institute and a 2000 Nobel laureate in economics. Mr. Fang is an economics professor at the University of Pennsylvania.