US Tariffs Will Not Bring Back Jobs from China

Although protectionism has become a rare point of bipartisan consensus in America, the public debate about it gets some basic facts wrong. Yes, trade is disruptive, but the US has been unwilling to take advantage of the opportunities generated by it and is instead trying in vain to recreate the jobs of the past.

Washington, DC – The vice-presidential debate between Minnesota Governor Tim Walz and Ohio Senator J.D. Vance earlier this month highlighted a point of bipartisan consensus in a heated election contest. After clashing over topics ranging from health care to immigration and the Middle East conflict, the candidates aligned on trade. Vance asserted that Americans need to “make more of our own stuff,” to which Walz replied, “I’m in agreement with him on this.”

Bipartisanship is not always good. For the sake of America’s long-term prosperity, I wish that the political consensus on this topic would crack.

As I explain in a new paper for the Aspen Economic Strategy Group, trade – like technological advances – is disruptive, but attempts to entomb the US economy in amber are not a helpful response. Worse, the protectionism of the Trump-Pence and Biden-Harris administrations has visibly hurt workers and consumers.

Part of the reason policymakers have taken such a wrong turn is that the public debate about open trade gets some basic facts wrong. Consider the much-discussed rise of China in the global economy. Over the course of the 1990s and 2000s, China became a world player, giving rise to the popular narrative from both Democratic and Republican politicians that this “China shock” destroyed US jobs.

The data tell a different story. Yes, the surge of Chinese imports cost jobs, with the largest estimates suggesting that America lost 200,000 jobs per year from 1999 to 2011 as a result of China’s integration into the global economy. But these losses are relatively small in the context of US labor-market dynamism: in a typical month, five million workers separate from their employers, of which 350,000 are in the manufacturing sector.

Moreover, this focus on the effects of Chinese imports fails to account for the fact that open trade also increases exports. Studying the 1999-2011 period, economists Robert C. Feenstra, Hong Ma, and Yuan Xu found that the 411,000 jobs gained from America’s ability to export goods to a global market almost fully offset the 533,000 jobs lost from import competition.

More important, the alternative to open trade – protectionism – is bad for consumers and workers. Former President Donald Trump’s tariffs against Chinese goods, which Joe Biden’s administration has maintained, were sold as being highly beneficial for manufacturing workers, if mildly harmful to consumers. Instead, as my AESG study shows, the tariffs have caused manufacturing employment to decline by increasing the costs of imported intermediate goods for domestic producers and prompting other countries to retaliate against US exporters.

Politicians have often justified tariffs as a way to “decouple” from China. Americans have become too dependent on cheap Chinese goods, the argument goes, and this threatens US economic and national security. But the Trump/Biden tariffs have not reduced US dependence on China; instead, many Chinese manufacturers have responded by rerouting goods through countries such as Mexico and Vietnam. Moreover, as I show in my paper, China’s share of the foreign value-added in US domestic final demand was higher in 2020 (the last year for which OECD data are available) than in 2017, the year before the trade war began.

Of course, tariffs on a narrow range of truly critical products – such as semiconductors – could be justified on national-security grounds. But even in those cases, the US should seek to build resilient trade networks with its allies before attempting to create a domestic industry from scratch. The ongoing struggles of Intel, anointed by the Biden administration as America’s chipmaking champion, demonstrate the need for global partnership.

The problem facing the US is not trade. It is the reluctance to take advantage of the opportunities generated by the disruption trade can bring. Creative destruction creates as well as destroys. My research finds that many new pathways to the middle class have been created over the past two decades, with occupations such as truck driving, computer support, and health care now providing the same comfortable life that manufacturing did decades ago. Unfortunately, America does a poor job of retraining workers for these jobs, and has erected barriers in the form of occupational licensing. Instead of trying to turn back the clock, policymakers should help Americans enter these fast-growing occupations.

It is pointless for Walz and Vance to debate about how to bring “American manufacturing back” from China. Rather than trying in vain to recreate the jobs of the past, the next US administration must focus on preparing workers for the jobs that are available today – and that will be needed tomorrow.