Latest news with #ChinaShock
Yahoo
5 hours ago
- Business
- Yahoo
Expert warns 'China Shock' on manufacturing that struck one state could spread to the rest of the country via the 'Big Beautiful Bill': 'A chilling effect'
Few states were hit harder by "the China Shock" than North Carolina. Now, few are seeing a bigger manufacturing revival. This is an economic turnaround story that every American should hear. After China joined the World Trade Organization in 2001, factory jobs in North Carolina collapsed — especially in textiles, apparel, and furniture. Entire communities in places like Hickory and Alamance County saw their local economies hollowed out. Between 2000 and 2010, the state lost nearly 330,000 manufacturing jobs — that's almost half its industrial workforce gone in less than a decade. The Great Recession accelerated those job losses as companies invested in automation. Since then, manufacturing jobs have been basically flat. But that could soon change. In 2022, Democrats passed the Inflation Reduction Act — the largest investment in clean energy and advanced manufacturing in U.S. history. North Carolina has emerged as one of the biggest winners of this law. Companies have flocked to the state, investing more than $20 billion in new advanced manufacturing facilities. These factories are expected to generate thousands of jobs. This manufacturing renaissance could come to an early end if the IRA is repealed as part of the so-called "Big Beautiful Bill." To that end, few U.S. senators will hold more sway in these negotiations than Thom Tillis from North Carolina. Tillis has voiced concern about killing the IRA, and he was one of four senators who publicly supported the protection of clean energy incentives. North Carolina has benefited from $23 billion in clean energy manufacturing investments since the IRA passed. If the law is repealed, the state could lose 17,500 future jobs. Tillis has warned that an abrupt repeal would create "whiplash" for investors and "devastate" America's ability to remain an innovation leader. Should the government continue to give tax incentives for energy-efficient home upgrades? Absolutely No Depends on the upgrade I don't know Click your choice to see results and speak your mind. An immediate phaseout, he told The Washington Post, would "have a chilling effect" on "future investments" in the domestic energy sector. In fact, the manufacturing renaissance resulting from the Inflation Reduction Act, CHIPS and Science Act, and Bipartisan Infrastructure Bill has amounted to a 279% increase in manufacturing across America. Whether that manufacturing growth will continue may be up to the senators debating the Big Beautiful Bill in Congress. Editor's note: If you want to use your voice to make a difference, you can look up how to contact your own state senators here — whether or not (and perhaps especially if not) they appear on this list. Michael Thomas is the founder of Cleanview, a platform that helps clean energy leaders track the energy transition in real-time, and the author of a newsletter about climate change, Distilled, that has been read by more than 50 million people. Follow Michael on LinkedIn here, where this post appeared in its original form, or subscribe to his newsletter here. Join our free newsletter for good news and useful tips, and don't miss this cool list of easy ways to help yourself while helping the planet.
South China Morning Post
7 days ago
- Business
- South China Morning Post
Sorry, but the ‘China shock' was actually pretty good for America
The idea that China has stolen millions of American jobs in recent decades, causing a collapse in the manufacturing labour market, has long been a staple anti-Chinese narrative on both sides of US politics. Even economists and media pundits who grudgingly acknowledge that cheap Chinese goods have made life easier and more affordable for the average American would complain about these alleged mass job losses. And the blue-collar voters most severely affected by sectoral lay-offs and the decline in regional manufacturing make up a fair segment of Donald Trump 's Maga – 'Make America Great Again' – movement. But is this so-called China shock actually real? 09:42 Trump promises to bring US manufacturing back from China, but will his tariffs work? Trump promises to bring US manufacturing back from China, but will his tariffs work? Among the most influential research defending the 'China shock' claim is a series of papers by David Autor of the Massachusetts Institute of Technology, David Dorn of the University of Zurich, and Gordon Hanson of the Harvard Kennedy School – especially their 2016 paper 'The China Shock: Learning from Labour Market Adjustment to Large Changes in Trade'.
Wall Street Journal
27-05-2025
- Business
- Wall Street Journal
The Real Story of the ‘China Shock'
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.
Asia Times
19-05-2025
- Business
- Asia Times
The statistical truth about American stagnation
A week ago I wrote a post arguing that globalization didn't hollow out the American middle class (as many people believe): After I wrote the post, John Lettieri of the Economic Innovation Group wrote a great thread that strongly supports my argument. He showed that the timing of America's wage stagnation — roughly, 1973 through 1994 — just didn't line up well with the era of globalization that began with NAFTA in 1994. In fact, American wages started growing again right after NAFTA was passed. Source: John Lettieri In fact, wage growth since NAFTA has been almost as strong as in the decades after World War 2! Now, I think this might be too simple of a story. Although there was a lot of noise and political hand-wringing over NAFTA, most Americans probably don't think it was competition from Mexico that hollowed out the US middle class — they think it was China. And while economists think NAFTA hurt some specific manufacturing industries in a few specific places, they generally conclude that it helped most Americans; it's the China Shock, after China's entry into the WTO in 2001, that many economists think was overall harmful to the working class. And if you add the China Shock to Lettieri's timeline, you see that by some measures — but not by others — there's a second, shorter era of wage stagnation that lines up with it pretty well. I've modified Lettieri's charts to show the China Shock: Source: John Lettieri, modified by Noah Smith You can see that median wages flatten out between 2003 and 2015, while average hourly earnings of production and nonsupervisory workers continue to rise. Obviously, the Great Recession is the biggest factor after 2007 (and many economists believe the China Shock only lasted through 2007). But there's a good argument that Chinese competition did hold American wages down for a few years in the 2000s. And in case you were wondering, here's the breakdown for men and women: Source: John Lettieri, modified by Noah Smith And Lettieri has more charts showing that the story looks the same for the working class as it does for the middle class. So I think the story is more nuanced than Lettieri makes it out to be. The surge in middle-class and working-class wages in the late 1990s might have come in spite of some small headwinds from NAFTA, and the China Shock might have exerted a drag on American wages during the 2000s. But the much bigger story that these charts tell is that the biggest wage stagnation in modern American history came before the era of globalization — roughly from 1973 through 1994. What was the cause of that epic stagnation? In macroeconomics, it's very hard to isolate cause and effect, since there are so many things going on at the same time. The decades between 1973 and 1994 featured two oil shocks, major inflation, two big changes in the global monetary regime, multiple major recessions, changes in trade deficits and imports, and plenty more. So much was going on that it's possible that the wage stagnation was just a series of negative shocks that lasted for a long time — 'just one damn thing after another', as the saying goes. But as a first pass, we can look at some of the theories of why that stagnation happened, and see if they match up with the timeline. Part of the stagnation in wages was due to rising inequality. If we look at average versus median hourly compensation (which includes benefits like health insurance and retirement matching contributions), we see that the average stagnated less than the median: Sources: EPI, Fred But you can still clearly see that from the early 1970s through the mid-1990s, the average value stagnated as well. This suggests that there was something systemic going on — it wasn't just the middle class getting hit. Part of that 'something' was a productivity stagnation. If you look at average hourly compensation versus average labor productivity (output per hour worked), you see a modest divergence, but the productivity slowdown from the early 1970s until the mid 1990s is clearly visible, and it exactly lines up with the stagnation in wages : Nobody knows exactly why productivity slowed down for two decades, but in my opinion, the leading candidate explanation is that the oil shock of 1973 inaugurated an era of energy scarcity that forced industrial economies to shift away from energy-intensive growth. Is it also possible that the same underlying shifts that made productivity slow down during those two decades also caused inequality to rise, and labor's share of income to fall from 63% to 61% over the exact same period? It seems plausible, because the timing lines up so perfectly. But I don't know of a good theory as to how a technological shift could cause all of these things at once. One common theory is that in the 1970s and 1980s, American industrial policy — including trade policy — stopped favoring manufacturing and started favoring the financial sector. This is, for example, the thesis of Judith Stein's 'Pivotal Decade: How the United States Traded Factories for Finance in the Seventies.' But if you look at the growth of the finance industry as a share of the US economy, it's a more or less unbroken rise from the end of WW2 through the turn of the century: Source: Greenwood & Scharfstein (2013) And if you look at financial profits, these actually fell as a share of the total in the 1970s before surging in the 1980s and again in the late 90s and early 00s: Source: James Kwak The timing here doesn't really line up. There's no clear measure of financialization that coincides specifically with the early 1970s through the mid-1990s. The explosion of finance profits in the 1980s might explain part of the wage stagnation, if it came via financiers putting pressure on companies to suppress wages. But that can't explain the wage stagnation in the 1970s, nor the re-acceleration in the late 90s and early 00s (when financial profits exploded but wages did well). A lot of research suggests that unions drive down economic inequality (though researchers disagree on exactly how big the effect is). Farber et al. (2021) write: US income inequality has varied inversely with union density over the past hundred years…We develop a new source of microdata on union membership dating back to 1936, survey data primarily from Gallup (N ≈ 980,000), to examine the long-run relationship between unions and inequality…Using distributional decompositions, time-series regressions, state-year regressions, as well as a new instrumental-variable strategy based on the 1935 legalization of unions and the World-War- II era War Labor Board, we find consistent evidence that unions reduce inequality, explaining a significant share of the dramatic fall in inequality between the mid-1930s and late 1940s. Here's a picture of that relationship: Source: Joe Nocera As we saw above, wage inequality — the divergence between average and median compensation — was responsible for part of the stagnation in middle-class wages, though not all of it. But the timing doesn't seem to fit here either. As you can see from that chart, unions have been in decline since the mid-1950s. The decline was a bit faster in the 1980s, which might slightly help explain wage stagnation in that decade. But overall, it's been pretty smooth. That doesn't match up with the 20-year wage stagnation that started in the early 70s and ended in the mid 90s. The chart of real wages for production and nonsupervisory workers shows a dramatic slowdown from around 1973-1994. But a chart of nominal wages for those same workers — i.e. the actual number of dollars they earned per hour — shows no such slowdown, except maybe a very gentle flattening in the 1980s: The difference, of course, is inflation. From around 1973 to 1983, prices increased at rapid rates: The smoothness of nominal wage growth raises the possibility that nominal wage growth is very sticky — that workers are able to negotiate about the same number of additional dollars from year to year, despite big changes in the purchasing power of a dollar. Again, the timing here doesn't line up with the era of wage stagnation. But I suppose it might explain the first half of it. Finally, we're back to trade and globalization. Certainly, Americans worried a lot about competition from European and Japanese companies, especially in the early 1980s. The Japanese and European auto and machine tool industries really did put American companies under intense competitive pressure starting in the 1970s. But it's very hard to see this effect in the aggregate statistics. Import penetration rose in the 1970s, but flatlined in the 1980s and early 1990s: Source: World Bank As for the trade deficit, that was zero in the 1970s and then had a brief but temporary surge in the 1980s: Recall that the current account deficit is almost exactly the same as the trade deficit. Some people I talk to seem to think that wage stagnation began as a result of the abolition of the Bretton Woods currency system in 1971-73. But that change, which ended the US dollar's role as the world's official reserve currency, caused the US dollar to depreciate, which made US exports more competitive and actually discouraged imports. The dollar then surged again in the early 80s and collapsed in the late 80s after the Plaza Accord (an agreement to weaken the dollar): Source: Bloomberg And the Japanese yen strengthened more or less steadily against the dollar during the entire period of wage stagnation. So trade with Europe and Japan just doesn't line up with the wage stagnation in terms of timing, either. If you think overall import penetration is the key measure of globalization, then maybe trade had an effect in the 1970s; if you think trade deficits are a better measure, then maybe trade had an effect in the 1990s. But then the trade deficit and imports both surged in the late 1990s, which is when the wage stagnation ended. In any case, we're left with a bit of a mystery. The only macro trend that lines up very neatly with the great wage stagnation of 1973-1994 is the productivity slowdown, but there's no good theory explaining how that could explain all of the wage stagnation, since productivity rose more than wages. Meanwhile, de-unionization, financialization, inflation, and trade with Europe and Japan can at best explain only some sub-periods of the wage stagnation — not the whole thing. In fact, the great wage stagnation might have been from a patchwork of causes — first inflation and a surge of imports in the 70s, then accelerated de-unionization and financialization and the collapse of exports in the 1980s, with the productivity stagnation playing a corrosive role the whole time. But we should always be suspicious of complex, multi-factorial explanations for trend breaks on a chart. That wage stagnation started and ended suddenly enough that it cries out for a simple story. We just don't have one yet. Update: Some people have been asking me if the wage stagnation of 1973-1994 might have been caused by the mass entry of women into the US workforce. Here's the employment rate (also called the 'employment-population ratio') for American women: You can see that the first part of the timing doesn't line up here. When the wage stagnation began, American women had already been entering the workforce at a steady clip for 25 years. (The labor force participation rate for women looks much the same). Also, empirical evidence suggests at most a small effect of female labor supply on male wages — and if you look at the breakdown for men and women, you see that the stagnation for men was worse than for women over 1973-1994. And theoretically speaking, women's mass entry into the workforce shouldn't produce an overall decline in wages. Just like immigration or a baby boom, women's entry into the workforce is both a positive labor supply shock and also a positive labor demand shock at the same time — when women earn more, they spend most of what they earn, on things that require labor to produce.1 So we shouldn't expect the addition of women to the workforce to hold down wages. Thus, this theory also doesn't line up with the timing of the stagnation, and it's not clear why we would expect it to be a major factor in the first place. This article was first published on Noah Smith's Noahpinion Substack and is republished with kind permission. Become a Noahopinion subscriber here.
Wall Street Journal
14-05-2025
- Business
- Wall Street Journal
Trump's ‘Golden Age' Isn't Out of Reach Yet
In 'Trump's Three Steps to Economic Growth' (op-ed, May 5), Treasury Secretary Scott Bessent paints a rosy picture of the administration's agenda but ignores critical flaws and costs of tariffs that threaten American families and global trade. While Mr. Bessent touts tariffs as a tool to 'rebalance' commerce, he omits their steep price: The Tax Foundation estimates current tariffs will cost households $1,300 annually, offsetting tax cut gains and undermining claims of Main Street prosperity-building. The secretary's reliance on the 'China Shock' to justify tariffs also overstates offshoring's role. While China's trade surge led to U.S. manufacturing job losses, automation and the rise of services as a comparative advantage for the U.S. played a significant part, reducing labor demand in factories. The China Shock authors admit, too, that job losses to China peaked around 2010. Messrs. Trump and Bessent are thus fighting yesterday's war. Tariffs won't reverse technological shifts, but they will harm efficient global supply chains, hurt U.S. consumers and risk short-run dollar appreciation that in turn would hit U.S. exports.
