Growing U.S. trade deficit with China cost 2.8 million jobs between 2001 and 2010

Robert E. Scott

The U.S.-China trade deficit has eliminated or displaced nearly 2.8 million U.S. jobs since 2001, a new Economic Policy Institute (EPI) briefing paper finds.  Growing U.S. trade deficit with China cost 2.8 million jobs between 2001 and 2010 by Robert Scott, EPI’s Director of Trade and Manufacturing Policy Research, finds that all 50 states, the District of Columbia and Puerto Rico suffered jobs lost or displaced as a result of the growing U.S.-China trade deficit.

The trade deficit with China grew from $84 billion in 2001, when China entered the WTO, to $278 billion in 2010.   It eliminated or displaced 2,790,100 jobs, or about 2% of total U.S. employment over that period.  The biggest net losses, in terms of the total number of jobs displaced, occurred in California, Texas, New York, Illinois, Florida, North Carolina, Pennsylvania, Ohio, Massachusetts and Georgia.  In ten states, the jobs lost or displaced exceeded 2.2% of total employment.  These states are New Hampshire, California, Massachusetts, Oregon, North Carolina, Minnesota, Idaho, Vermont, Colorado and Rhode Island.

Of the nearly 2.8 million jobs lost or displaced, 1.9 million of them were in manufacturing.  These jobs represent nearly half of all U.S. manufacturing jobs lost between 2001 and 2010.  The largest share of manufacturing jobs lost or displaced were in computer and electronic parts, at 909,400 jobs, or 32% of all jobs lost or displaced.  Other hard-hit sectors of the manufacturing industry were apparel and accessories, textile fabrics and products, fabricated metal products, plastic and rubber products and motor vehicles and parts.  Service industries, including administrative, support and waste management services experienced significant job displacement.

Increases in U.S. exports tend to create jobs in the United States, and increases in imports tend to lead to job loss.  Thus, a growing trade deficit signifies growing job loss.  The trade deficit with China is exacerbated by the currency manipulation.  Because China has pegged its currency to the U.S. dollar instead of allowing it to fluctuate freely, the yuan has remained artificially low, effectively subsidizing Chinese exports and artificially raising the cost of U.S. exports.  U.S. goods are less competitive in China and in countries where U.S. exports compete with those from China.

The impact of the trade deficit with China extends beyond U.S. jobs lost or displaced.  Competition with China and countries like it has resulted in lower wages and less bargaining power for U.S. workers in manufacturing and for all workers with less than a four-year college degree.

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