The US Trade Deficit With China Has Cost 3.4 Million US Jobs

China was granted admission to the World Trade Organization (WTO) in late 2001 and since then the U.S. annual trade deficit with China increased from $83.0 billion to $375.2 billion in 2017. That increase has cost U.S. workers 4.14 million lost jobs due to the number of goods imported from China and added 780,000 jobs in U.S. jobs that produced goods for export. The net impact has been the loss of 3.36 million American jobs in the 16 years since China became a full member of the WTO.

The data were reported Tuesday morning in a new study from the Economic Policy Institute (EPI) titled “The China Toll Deepens.” EPI has been updating its research on U.S.-China trade and jobs since 2012. The EPI model estimates the amount of labor (number of jobs) required to produce a given volume of exports and the labor displaced when a given volume of imports is substituted for domestic output. The difference between these two numbers is essentially the jobs displaced by the growing trade deficit, holding all else equal.

The report’s authors, Robert E. Scott and Zane Mokhiber, offer this one-sentence outline:

As with our previous analyses, we find that because imports from China have soared while exports to China have increased much less, the United States is both losing jobs in manufacturing (in electronics and high tech, apparel, textiles, and a range of heavier durable goods industries) and missing opportunities to add jobs in manufacturing (in exporting industries such as transportation equipment, agricultural products, computer and electronic parts, chemicals, machinery, and food and beverages).

Every state and every congressional district in every state has lost jobs. The 10 states hit hardest were New Hampshire, Oregon, California, Minnesota, North Carolina, Rhode Island, Massachusetts, Vermont, Wisconsin and Texas. As a percentage of total state employment, New Hampshire lost 3.55% of its jobs while Texas lost 2.57%.

Based on total jobs lost, the five states hit the hardest were California (562,500 jobs lost), Texas (314,000), New York (183,500), Illinois (148,200) and Pennsylvania (136,100). The trade deficit hit the computer and electronic parts industry hardest, costing 1.21 million jobs over the period, or about 35% of the total.

In nominal dollars, the manufacturing trade deficit with China totals $320.8 billion, of which some $230.5 billion represents durable goods. Nearly all (99.4%) of growth in U.S. imports of Chinese goods is accounted for by manufactured goods.

Of the total 3.4 million jobs lost since 2001 related to trade with China, 74.4% (2.5 million) were manufacturing jobs.

The EPI report attributes the swelling U.S. trade deficit with China is to “China’s trade-distorting practices, aided by China’s currency manipulation and misalignment and its suppression of wages and labor rights.” Add to this the Chinese failure to ramp up demand for either imported or domestically produced goods and expanded foreign direct investment in China. The inevitable outcome was overproduction of goods like steel, renewable energy products (solar PV cells) and others that ended up being dumped on global markets, particularly the United States.

Citing prior research, the EPI study estimates that between 2001 and 2011, 2.7 million U.S. workers were displaced from jobs in exporting industries that paid an average of $1,021.66 a week to jobs that competed with imported goods (if such a job could be found) that paid an average of $791.14 a week. That works out to a direct net wage loss of $37 billion annually.

Indirect losses would push that total even higher. Again citing earlier research, the EPI study estimates that indirect, macroeconomic losses to U.S. workers without college degrees caused by growing trade with low-wage nations were about five times as large as the $37 billion in direct wage losses in 2011 from trade with China.

The full EPI report is available at the organization’s website.