Debunking the Trade and Unemployment Myth: A Closer Look at U.S.-China Relations
There’s a pervasive myth that trade with China has been the primary driver of rising unemployment in the United States. However, this is a misconception. While it is true that imports from China have led to job reductions in certain sectors, the overall employment landscape has not suffered as a result. In fact, job creation in other industries has offset these losses, keeping the unemployment rate stable.
Last year, China’s trade surplus soared to an astonishing nearly a trillion dollars. If we were to believe the mercantilist perspective, one would expect China to be enjoying a manufacturing employment boom. Yet, the reality is strikingly differentâmillions of manufacturing jobs are disappearing, and China’s unemployment rate has surpassed that of the U.S.
According to the Financial Times, job losses span a diverse range of manufacturing sectors:
The Financial Times notes that while some jobs have shifted to neighboring East Asian countries, the predominant culprit behind job loss is automation:
Manufacturing in China is far from extinct. In a Panyu factory on the outskirts of Guangzhou, humans and machines work in harmony, producing new electric vehicles every 53 seconds. However, in certain stages of productionâlike the moment when seven robots lift, rotate, and fit windscreens onto chassisâhumans are vastly outnumbered by machines.
Moreover, tasks such as the hazardous welding and coating of car doors are fully automated, resulting in an overall automation rate of 40% in the final assembly process. This push for automation is intentional, as explained by engineer Li Xiaoyu, who states that the factory aims to reduce its human workforce by 10% annually.
Automation has similarly driven job losses in U.S. manufacturing. Unfortunately, many politicians have scapegoated trade for these job reductions, fueling a rise in global nationalism. If trade were genuinely the issue, one would expect China’s sizeable trade surplus to translate into a booming manufacturing sector. Instead, the country has lost over 7 million manufacturing jobs since 2011:
Research conducted by academics from Changzhou University, Yancheng Teachers University, and Henan University examined 12 labor-intensive manufacturing sectors from 2011 to 2019. Their findings revealed an average employment decline of approximately 14%, equating to nearly 4 million jobs, with the textile industry alone witnessing a staggering 40% drop during this period.
An analysis by the Financial Times of the same sectors from 2019 to 2023 identified an additional loss of 3.4 million jobs.
