US Trade Deficit With China Has Cost 3.7 Million US Jobs

Jobs

Published: January 30, 2020 1:23 pm

Since 2001, when China joined the World Trade Organization (WTO), U.S. trade with China has shifted from an annual surplus of $83 billion to a 2018 trade deficit of $153 billion. The total trade balance between the two countries between 2001 and 2018 has resulted in a total U.S. deficit of $336.5 billion.

The data was reported Thursday by the Economic Policy Institute (EPI) in a study of the effect that U.S.-China trade has had on U.S. jobs. According to the report, the United States has lost 3.7 million jobs directly as a result of the trade deficit in goods.

Since 2008, the first full year of the Great Recession, the United States has lost 1.7 million jobs, and three-quarters of the losses since 2001 have come in the manufacturing sector. In the first two years of the Trump administration, 2017 and 2018, the deficit has risen 21%, from $347 billion to $420 billion. More than 700,000 American jobs were lost in the same two-year period.

Of the 3.7 million jobs lost, 36.2% (1.34 million) came in the manufacturing of computers and electronic parts. The apparel, leather and allied products sector came in a distant second, losing 5.6% of the total, or 205,700 jobs.

Employment in every state was affected by the rising deficits, according to the EPI study. As a percentage of all jobs in the state, the 10 states suffering the greatest job displacement were New Hampshire (3.66%), Oregon (3.64%), California (3.64%), North Carolina (3.23%), Minnesota (3.18%), Massachusetts (3.10%), Wisconsin (3.02%), Vermont (2.93%), Indiana (2.92%) and Idaho (2.82%).

The states suffering the fewest job losses were Alaska and Wyoming, each of which lost 0.85% of their jobs as a result of the rising deficit. The District of Columbia (0.92%) and Hawaii (0.98%) also lost less than 1% of their jobs due to the trade deficit with China.

Based on numbers of jobs lost, California lost nearly twice as many jobs, 654,100, due to the trade deficit as Texas, with the second-highest total of 334,800 jobs lost.

To balance the 2001 through 2018 trade books between the United States and China, EPI estimates that U.S. exports to China would have had to increase by nearly 4.5 times in 2018. To reach that target, exports of transportation equipment, for example, would have risen from $2.9 billion in 2001 to $111.9 billion in 2018. In fact, transportation exports totaled $27.8 billion in 2018 and had a positive balance of $5.8 billion for the United States.

A similar shift to a positive trade balance in other areas would have prevented the “collapse of overall U.S. manufacturing employment” between 2001 and 2018, according to EPI. However, such growth could only have occurred if there had been “major structural changes in China’s trade, industrial, macroeconomic, and labor policies.” EPI notes, “This analysis does illustrate the potential gains had China trade delivered on the promises made by China trade proponents when China entered the WTO in 2001.”

EPI concludes that “China and America are locked in destructive, interdependent economic cycles, and both can gain from rebalancing trade and capital flows. … China needs to rebalance its economy by becoming less dependent on exports and more dependent on domestic demand led by higher wages and infrastructure spending. It also needs to reduce excessive levels of domestic savings to better align savings levels with domestic investment and government borrowing.”

EPI reckons that the growing trade deficit with economic powerhouse China has reduced U.S. wages once paid to displaced workers of $37 billion just through the 10-year period ending in 2011. The deficit also has cost about $1,800 annually in lower wages for all non-college-educated U.S. workers.

Tariffs on Chinese exports are not the answer, although EPI does not go there. According to a new study by New York Fed economist Mary Amiti and others cited in the New York Times, “U.S. tariffs continue to be almost entirely borne by U.S. firms and consumers.” The only value that U.S. tariffs (one of the most notable events of the Trump presidency) may have had was to bring China to the table to negotiate how the country can rebalance its own economy. That value has long-since disappeared.