The surge coincided with two important events that are forever linked to it: 1) the 2000 passage of U.S. law granting China permanent normal trade relations (PNTR) status, which cemented for Chinese imports the lower tariffs that the United States already applied to imports of almost all other nations; and 2) China’s official entry into the World Trade Organization in 2001. As the chart above shows, the surge moderated substantially after the Great Recession and effectively stopped by the middle of the 2010s (pre-Trump).
The academic discussion, however, was just getting started.
Following their 2013 paper on the same subject, economists David H. Autor, David Dorn, and Gordon H. Hanson published their seminal work on the issue, “The China Shock,” in 2016. According to their calculations, increased Chinese imports between 1997 and 2011 were directly or indirectly responsible for roughly 2 million lost U.S. jobs, including 985,000 in manufacturing. The most affected subsectors included industries with low‐skilled workers, such as apparel, textiles, footwear, and computer/electronic parts. When including local employment, the authors estimated total U.S. job losses of up to 2.4 million positions between 1999 and 2011 (the “official” China Shock period).
Since then, the same authors have examined the China Shock’s effects on other issues, such as marriage and drug addiction, again finding harms. Their papers have been joined by others showing similar employment results, such as one by economists Justin Pierce and Peter Schott focused on PNTR, and the collection of papers has supported still other economics research employing various methodologies and data—and often finding statistically significant damage to American workers and their communities from the surge in Chinese imports.
Combined, these papers form the academic backbone of not only the “China Shock” discussion, but also broader arguments against free trade and globalization as well as the current political narrative surrounding past U.S.‐China trade policy—as Yellen’s China trip and recent comments show. Unfortunately, folks writing about this stuff routinely misstate or misunderstand the China Shock research and the origins of the shock itself, and they ignore a library of other China‐related work that offsets—if not outright refutes—the China Shock papers’ conclusions.
Let’s tick through these mistakes one by one.
Mistake 1: U.S. Policy Wasn’t the Primary Driver of the China Shock
Both journalists and critics of U.S.‐China trade policy routinely assert that PNTR and China’s WTO entry, both U.S. policy choices, drove the China Shock. However, leaving aside whether U.S. officials really had much of a choice for either policy (itself an open question, as I detailed in 2020, given the surrounding events and realistic alternatives), history and academic research show that U.S. trade policy changes weren’t the main things fueling China’s improved export competitiveness (and thus the China Shock) in the 2000s.
First, PNTR did not actually open the United States to Chinese imports. Instead, the U.S. had annually granted China “most favored nation” (MFN) status (later changed to “normal trade relations”) every year since 1980, meaning the country’s imports faced no greater trade barriers than those from most other U.S. trading partners. Only once between 1990 and 2001 was China’s MFN status truly in doubt: in 1992, when a presidential veto was needed to maintain it. Thanks to two decades of uninterrupted MFN renewals, Chinese imports to the United States increased more than sixfold in the decade preceding PNTR, and—as a 1998 Congressional Research Service analysis detailed—the rational expectation of most U.S. importers was more of the same. There is some evidence that the certainty of permanent trade relations accelerated Chinese imports after PNTR was implemented (in turn causing U.S. job losses), but experts disagree about the magnitude of this effect because the uncertainty surrounding Congress’ annual MFN votes had evaporated by the late 1990s. (Less uncertainty means less PNTR effect on Chinese imports.)
More importantly, economists have repeatedly found that other factors—not PNTR or China’s WTO accession—were the main drivers of the China Shock. Economists Kyle Handley and Nuno Limão, for example, found that PNTR’s reduction in trade policy uncertainty accounted for only about one‐third of the growth in Chinese exports to the United States between 2000 and 2005. Mary Amiti and colleagues found similar results, attributing approximately two‐thirds of the trade effects on U.S. manufacturing not to PNTR but to China’s own tariff reductions, which counterintuitively make exporters more competitive. (Preliminary results from a new group of economists suggest that—again contra the narrative—China reduced domestic tariffs by a greater amount than was expected for nations joining the WTO.) Even the China Shock papers by Autor, Dorn, and Hanson (I’ll refer to them as ADH going forward) emphasize that China’s internal reforms—on privatization, trading rights, and (again) import liberalization—were the major contributors to China’s export surge in the late 1990s and 2000s.
In short, PNTR probably accelerated Chinese exports to the United States by reducing tariff uncertainty, but it was China’s own market‐based reforms—policies beyond U.S. officials’ control and ones China critics should cheer—that were the China Shock’s biggest drivers.
Mistake 2: The China Shock Didn’t Destroy 2 Million-Plus U.S. Manufacturing Jobs
The ADH China Shock papers are frequently characterized as showing that Chinese imports during the 2000s did serious damage to the U.S. economy writ large and especially to American manufacturing employment. But this gets three big points wrong about what the papers actually did and didn’t say:
First, the figure of 2.4 million lost jobs during 1999 and 2011 was the authors’ maximum (“upper bound”) estimate, with the more likely scenario (“central estimate”) being only about half that number. Just as importantly, only half of those job losses were in manufacturing—all the others were in local and supporting services. Those jobs matter too, of course, but common claims that the China Shock destroyed 2 million or more American manufacturing jobs are—by even the authors’ most extreme estimates—just plain wrong.
Second, the ADH papers focus strictly on job losses incurred by specific local labor markets because of the China Shock—they don’t account for everything else happening in the U.S. economy at the same time, including Chinese imports’ other effects. This methodological issue is really important, because a) the much-ballyhooed 2.4 million job losses (max) came amid an economy‐wide gain of approximately 2.2 million U.S. jobs (even as the labor market effects of the Great Recession persisted beyond 2011); and b) those 1 million lost manufacturing jobs (max) accounted for less than 20 percent of the total manufacturing job losses over the same timeframe—and a tiny fraction of the tens of millions of job separations that occur in the United States each year. Thus, even the China Shock papers themselves confirm that manufacturing job losses caused by Chinese imports were at best a significant contributor to—not the main driver of—total factory job declines during the 2000s.
Third, the authors’ major and novel contribution to the economics literature wasn’t actually the trade findings—imports and jobs have long been analyzed—but that displaced U.S. manufacturing workers didn’t adjust like economists expected and instead became unemployed or exited the labor force. This effect was more pronounced for workers without a college education and for low‐earning workers, and in their latest (2021) paper, ADH assert that the negative effects of the China Shock persisted all the way through 2019.
Americans’ lack of adjustment is important for lots of policy reasons (many of which I often discuss), but it also comes with several important asterisks that Autor, Dorn, and Hanson themselves bring up. They make clear that their findings relate to any significant economic disruption (e.g., technological change), not merely Chinese import competition. Thus, the trio asserts that policies addressing the problems identified in the China Shock papers should focus on helping workers adjust to trade or other disruptions, not stopping the disruptions from occurring (e.g., with tariffs or other forms of protectionism). As Hanson wrote in a 2021 article, “The China trade shock hurt many US workers and their communities. But so, too, have automation, the Great Recession, and the COVID-19 pandemic. And because the scarring effects of job losses are the same whether imports, robots, or a virus is responsible, responses to the damage should not depend on the identity of the culprit.”
Also, the trio notes that their China Shock work does not challenge the overall benefits of free trade for the U.S. economy; as the New York Times reported in 2016, for example, “Mr. Autor, like most economists, is still persuaded of the long‐established benefits that global trade confers on the economy as a whole.”
Those using the China Shock to advocate new U.S. protectionism have missed these crucial points.
Mistake 3: The China Shock Probably Didn’t Destroy Millions of American Jobs of Any Kind (on Net)
Although the ADH papers are frequently reported as the definitive take on the China Shock period and the economic effects of Chinese imports, many other peer-reviewed studies from well-respected economists call into question the somewhat bleak China Shock picture of a “post‐globalized America” with persistent job losses for the poorest and most uneducated workers, increased geographical disparities, and familial life filled with challenges. In fact, while most experts agree that Chinese import competition caused some American manufacturing workers to lose their jobs during the 1990s and 2000s, the debate still rages as to the scale of this disruption and the overall effects of Chinese imports on the U.S. workforce.
On manufacturing jobs, for example, several studies find that Chinese import competition was directly responsible for far fewer losses than the totals calculated in the China Shock papers. One of the most definitive reviews attributed only about 15 percent of lost U.S. factory jobs between 2000 and 2007 to the China Shock—a finding the White House Council of Economic Advisers recently highlighted in its 2024 Economic Report of the President. Other papers have found offsetting job gains from exports to China or smaller job losses when considering factors such as value‐added trade flows or the changes in the U.S. housing market, leading to estimates of net U.S. manufacturing job loss as low as 0.22 percent of nonfarm employment (i.e., just 300,000 jobs over a decade!). Wonkier methodological concerns raise further questions about the exact numbers put forth in the ADH papers.
Other experts go even further and question not merely the China Shock papers’ numbers but their conclusions entirely. Economists Alan Reynolds and Philip Levy, along with former U.S. diplomat Charles Freeman, have argued that the China Shock likely caused an even smaller decline in U.S. manufacturing employment (if one at all) after accounting for other trends—especially productivity gains and non‐China imports. These and other scholars note that the manufacturing sector’s share of the U.S. workforce declined steadily before and during the shock period because of trade, technology, American workers’ increasing skill levels, and the economy’s natural transition to services—long-term trends that many other advanced economies (including net manufacturing exporters like Germany) experienced too.
