In a Wall Street Journal op-ed Monday, Treasury Secretary Scott Bessent claimed that “3.7 million Americans lost their jobs” due to the “China Shock”—the increased import competition occurring after China was granted membership in the World Trade Organization. He cites research by David Autor, David Dorn, and Gordon Hanson, linking to two of their papers. But it appears that Secretary Bessent’s numbers use a calculation not in those papers. His 3.7 million total is likely too large by a factor of at least two to four, and the actual impact of increased trade with China may have been to boost manufacturing employment.
What’s more, the underlying Autor, Dorn, and Hanson estimates that appear to be the basis for his calculations have issues.
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From 1994 to 2019, manufacturing’s share of employment fell by 36 percent. That might seem like an indictment of NAFTA unless you know that the decline was 49 percent in Australia, 34 percent in Canada, 34 percent in Denmark, 38 percent in France, 23 percent in Italy, 32 percent in Japan, 41 percent in the Netherlands, 39 percent in Spain, 44 percent in Sweden, and 52 percent in the United Kingdom.
In fact, manufacturing as a share of employment had already fallen steadily for decades before 1994. In 1953, 37 percent of the private US workforce was employed in manufacturing. Why pick 1953? It was the postwar high (although “postwar” is perhaps not quite right because manufacturing in 1953 was goosed by the Korean War). Within a decade of the end of World War II, manufacturing jobs were on the way out.
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Other evidence confirms that the rate of manufacturing job destruction did not increase after China entered the WTO. The Census Bureau’s Business Dynamics Statistics data cover 1978 to 2022. We can use them to measure changes in the rate of net manufacturing job creation (increases due to expansions or openings less losses due to contractions or closures). The trend line in Figure 3 confirms the decline in manufacturing employment (it is below zero) but its flatness indicates that the rate of decrease was steady rather than accelerating after the China Shock. In fact, its flatness casts doubt on whether “shock” is even appropriate as a metaphor.
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The evidence is most consistent with the long-running decline in manufacturing employment around the rich world owing to rising productivity, particularly via automation. In the US, for instance, while manufacturing employment fell by 3.6 million workers from 2001 to 2024 (or 22 percent), real manufacturing value added increased by $800 billion, or 50 percent. The reason is that labor productivity in the sector rose. Real value added per hour increased by 93 percent.[5]
In short, American manufacturing increasingly produces more with fewer employees. But rather than more workers being involuntarily out of work, the American workforce has shifted into other sectors of the economy where demand has grown. That increased demand has been fueled, in part, by the purchasing power freed up by lower-priced goods due to automation and imports.
Treasury Secretary Scott Bessent insists that we evaluate the Trump administration’s economic program in toto, rather than critiquing any individual element (“Trump’s Three Steps to Economic Growth,” op-ed, May 5). One can understand the request, considering analysts predict that the gross-domestic-product losses sure to be incurred from new tariffs, retaliation and economic uncertainty will likely offset any real GDP gains from tax reform and deregulation.
Yet Mr. Bessent goes on to misstate the conclusions of the “China Shock” literature, exaggerating losses and ignoring gains, while citing three tariff objectives that are as mutually exclusive as they are elusive: opening markets, reshoring industry and raising revenue. This myopia and misdirection have become standard fare as the administration continually shifts its rationale for ill-advised and indefensible trade policy.
Perhaps worst of all, Mr. Bessent buys into the narrative, long pushed by the left, that the vast majority of middle-class, Main Street Americans haven’t benefited from decades of open trade and strong economic performance. That’s belied by decades of real median wage gains and record-low unemployment. This fallacy leads to bad policy, such as making an already too-narrow tax base narrower by exempting tips and overtime from taxes. The U.S. already has the most progressive tax system in the developed world. It would be foolish to make it more so. To paraphrase The Who’s famous lyric: The party on the right is now the party on the left.
My intrepid Mercatus Center colleague, Veronique de Rugy, is among those who are appalled by the sloppy thinking that runs through Bessent’s Wall Street Journal piece. A slice from Vero:
Let’s start with tariffs, because these are the biggest and most dangerous part of this administration’s economic strategy — and the one Bessent tries hardest to whitewash. He repeats the tired claim that tariffs are a tool for “rebalancing” trade and rebuilding the industrial base in the name of American workers. (By the way, American workers — Bessent fails to mention — are doing better than any workers anywhere in the world.) But we’ve seen this movie before. During Trump’s first term, the tariffs didn’t miraculously reshore supply chains or deliver a manufacturing renaissance. Instead, they raised costs for American consumers and producers, punished U.S. exporters with retaliation, and triggered investment uncertainty that chilled business confidence across sectors.
In his second term, Trump has more than doubled down, with his at-a-minimum 10 percent universal tariff (tariffs for all except for the swamp exemptions, that is). And because every day brings another random insanity, Trump has even slapped a 100 percent tariff on foreign films. (Because why not?) This isn’t policy; this is juvenile whimsy with real economic consequences.
The high-end estimate of manufacturing jobs “lost” due to trade with China is 2 million over ten years. That sounds like a lot, until you consider that about 5 million U.S. workers separated from their jobs last month. Of course, if job losses are concentrated in one area and happen simultaneously, that can cause problems for that area. No economist denies this. How national economic policy can fix that is never said. Nocera makes the classic move of advocating greater government programs for job training, but we know from years of experience that such programs don’t work very well.
Nocera thinks he’s being a good journalist by emailing David Autor, one of the authors of the most famous “China shock” paper, who, you’ll be shocked to learn, thinks that the paper he cowrote is good. The smarter move would have been to email critics of that paper and its conclusions. Winship outlines several subsequent papers that have found the negative effects from exposure to Chinese imports are much smaller than Autor et al. suggest, with some even finding positive effects. Who’s right? I don’t know. It’s a live question right now among economists that is yielding lots of interesting social science. Maybe read some of it instead of casting economists as stale dogmatists.
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Fortunately, we don’t have to rely on caricatures from journalists about local economies and segments of the labor force. We can look at real evidence about what actually happened. Economist Jeremy Horpedahl from the University of Central Arkansas — not a hotbed of globalist elitism! — did just that in a blog post.
From 2001, when China entered the WTO, to 2024, every single state has seen real median wage growth. No exceptions. (And yes, “real” means “adjusted for inflation.”) Michigan did have the lowest real median wage growth of any state, but North Carolina’s increased by 24 percent.
Horpedahl then looks at wage growth for workers in the tenth percentile, i.e., low-wage workers. Their wages increased faster than the median workers’ wages in 44 states. Again, every state saw an increase.
What about workers who finished high school and did not go to college? Their real median wage is currently at an all-time high. With the exception of Covid, it has been increasing since about 2013.
The EFW [Economic Freedom of the World] rankings are relative rankings, so we can fall either because our terms of trade have deteriorated or because other countries have improved. As Douglas Irwin said in a recent WSJ article, “The U.S. shouldn’t have stupid tariff policies just because other countries have stupid tariff policies.” We’re now in a world in which other countries are enacting stupid policies in response to Trump’s misguided trade agenda. Even if our relative rankings improve, raw scores will undoubtedly decline here and abroad.
On a fundamental level, President Trump doesn’t believe that positive sum games are possible. The world, in his view, is a zero-sum game. Yet worldwide the average person is 4.4 times richer than they were in 1950, even with a concurrent explosion in population of 5.5 billion people. This explosion in prosperity was facilitated by the international alliances that were forged over this period. Indeed, countries like South Korea, Taiwan, and Singapore who opened themselves up to comprehensive international trade are now more than 30 times richer than they were in 1950. Trade is the ultimate positive sum game.
Your May 1 editorial “Sean O’Brien and the UPS Layoffs” rightly notes that rich labor contracts can boomerang on the workers they’re supposed to help. My new research with Revana Sharfuddin shows the problem isn’t unique to United Parcel Service—it’s systemic.
Three decades of U.S. and European experience and 147 empirical studies demonstrate that when a union wields monopoly power to extract large, across-the-board wage hikes, employment growth slows, capital and R&D spending fall and the odds of future layoffs increase. Such dynamics account for more than half of the Rust Belt’s manufacturing job losses between 1950 and 2000.
The wage premium that once justified such risks has also withered. The private-sector union “bump” usually disappears in five to 10 years, leaving displaced workers chasing other, lower-paid jobs. In short, headline-grabbing union deals are delivering short-run sugar highs and long-run hangovers.
Modernizing the National Labor Relations Act so that employees are allowed to bargain for themselves would expand worker choice and force unions to compete for loyalty through the right mix of pay and benefits—all while ending the free-rider complaint that unions have with right-to-work laws.
John Stossel sensibly wonders why there exists a federal Department of Education.
