We Warned About the First China Shock. The Next One Will Be Worse.

[dalton99a]

https://www.nytimes.com/2025/07/14/opinion/china-shock-economy-manufacturing.html

https://archive.ph/NIBMJ

We Warned About the First China Shock. The Next One Will Be Worse.
July 14, 2025, 5:01 a.m. ET
By David Autor and Gordon Hanson

David Autor is an economics professor at the Massachusetts Institute of Technology. Gordon Hanson is an economics professor at Harvard University’s Kennedy School. They are both known for their research into how globalization, and especially the rise of China, reshaped the American labor market.

The first time China upended the U.S. economy, between 1999 and 2007, it helped erase nearly a quarter of all U.S. manufacturing jobs. Known as the China Shock, it was driven by a singular process — China’s late-1970s transition from Maoist central planning to a market economy, which rapidly moved the country’s labor and capital from collective rural farms to capitalist urban factories. Waves of inexpensive goods from China imploded the economic foundations of places where manufacturing was the main game in town, such as Martinsville, Va., and High Point, N.C., formerly the self-titled sweatshirt and furniture capitals of the world. Twenty years later, those workers haven’t recovered from those job losses. Although places like these are growing again, most job gains are in low-wage industries. A similar story played out in dozens of labor-intensive industries simultaneously: textiles, toys, sporting goods, electronics, plastics and auto parts.

Yet once China’s Mao-to-manufacturing transition was complete, sometime around 2015, the shock stopped building. Since then, U.S. manufacturing employment has rebounded, growing under President Barack Obama, the first Trump term and President Biden.

So why, you might ask, are we still talking about the China Shock? We wish we weren’t. We published the research in 2013, 2014 and 2016, along with our collaborator David Dorn of the University of Zurich, which detailed for the first time how Chinese import competition was devastating parts of America, through permanent declines in employment and earnings. We are here to argue now that policymakers are spending far too much time looking backward, fighting the last war. They should be spending much more time examining what’s emerging as a new China Shock.

China Shock 1.0 was a one-time event. In essence, China figured out how to do what it should have been doing decades earlier. In the United States, that led to unnecessarily painfully job losses. But America was never going to be selling tennis sneakers on Temu or assembling AirPods. China’s manufacturing work force is thought to be well in excess of 100 million, compared with America’s 13 million. It’s bordering on delusional to think the United States can — or should even want to — simultaneously compete with China in semiconductors and tennis sneakers alike.

China Shock 2.0, the one that’s fast approaching, is where China goes from underdog to favorite. Today, it is aggressively contesting the innovative sectors where the United States has long been the unquestioned leader: aviation, A.I., telecommunications, microprocessors, robotics, nuclear and fusion power, quantum computing, biotech and pharma, solar, batteries. Owning these sectors yields dividends: economic spoils from high profits and high-wage jobs; geopolitical heft from shaping the technological frontier; and military prowess from controlling the battlefield. General Motors, Boeing and Intel are American national champions, but they’ve all seen better days and we’re going to miss them if they’re gone. China’s technological vision is already reordering governments and markets in Africa, Latin America, Southeast Asia and increasingly Eastern Europe. Expect this influence to grow as the United States retreats into an isolationist MAGAsphere.

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[UpInArms]

1. Thank you for this very important discussion

[dutch777]

2. And Trump makes it easier for China every day....killing higher ed and other research, alienating everyone that counts.

Trump wants to MAGA and revive manufacturing without making policy or fiscal stimulus moves that will actually help that in real time. I suppose the theory is the tax and regulatory cuts will encourage companies to invest more capital and also why he wants Fed rate cuts. But without a focused and cohesive national plan, and with all the discouragement to higher ed and the best and brightest therein, it is all catch as catch can and there is nothing to stop corporations from taking their US tax savings and invest them in operations in other countries where there IS a plan and sane governance. Just like there is nothing stopping innovative genius from leaving America for more welcoming and fertile ground overseas.

[Collimator]

6. Your comments bring to mind something that my French teacher from high school once said. . .

. . . to paraphrase, you can't push unquestioning obedience in a society AND expect innovative thinking.

(Not sure how that came up in French class, but learning doesn't always happen in a straight line.)

The point is, any hope of making America "great" or exceptional or wanting the country to excel is doomed if you are also appealing to people's basest instincts or just telling them to trust whatever you say and not to think too hard.

[erronis]

7. On ne dirige pas en poussant. You don't lead by pushing.

Excellent points.

My poor attempt at translation.

[BeyondGeography]

3. We're clearly on the road to loserville

From the article:

And if you doubt China’s capability or determination, the evidence is not on your side. According to the Australian Strategic Policy Institute, an independent think tank funded by the Australian Department of Defense, the United States led China in 60 of 64 frontier technologies, such as A.I. and cryptography, between 2003 and 2007, while China led the United States in just three. In the most recent report, covering 2019 through 2023, the rankings were flipped on their head. China led in 57 of 64 key technologies, and the United States held the lead in only seven.

And now Trump is undoing everything Biden did to right the ship. Why our party’s leadership isn’t branding him as Captain Loser and screaming from the political hilltops every day that our economy is on an elevator straight to hell is another one of life’s mysteries.

[Shipwack]

12. They're waiting for "the fever to break"... nt

[modrepub]

18. Scream All you Want

MAGA has built its own little world for itself. They’ll never believe any facts you present to them. Though, in the long run, you can’t change the laws of physics.

He thrusts his hands against the post and still insists he sees the ghosts….

[Joinfortmill]

4. Everything Trump touches dies. Impeach him.

[RainCaster]

5. Worth the time to read!

Thank you for posting this, including the non paywall link. The few paragraphs you offered us are not enough to uncover the essence of the article. Go read the whole thing, you will gain in understanding.

[NNadir]

8. In most of the major scientific journals I read, roughly half...

...of the papers on average have authors with Chinese names.

The orange dementia victim in the White House's attack on science will make things vastly worse. We are unlikely to recover. The model for our collapse in science leadership is 1930s Germany.

[kkmarie]

9. All of the usa trading partners are going to China

And working among themselves. They all are going to be just fine. And I'm very happy for them protecting their economies.
The usa has made it's bed and now we, no matter if we voted for this or not, have to lie in in it. The Krasnov regime and project 2025 has probably accelerated China shock 2.0.

It won't wake up the maga cult members but maybe it will get through to the 90+ million who chose not to vote.

I can almost forgive the maga they are driven by their ignorance and hatred and that's what Krasnov promised them. But I will never, never, forgive those who chose to stay home, it means to me they couldn't have cared less what happened to our country.

[Farmer-Rick]

10. There were plenty of other reasons why the US lost so many jobs

I remember NAFTA, "free" trade, deregulation, removal of New Deal price controls, more "free" trade agreements, removal of Buy American incentives, rescinding of Glass Steagell, banks playing around with mortgage derivatives and tax give aways to the filthy-rich. It all added up to hollow out the US economy.

[Mr.Bee]

14. Somebody Should've Warned Reagan

This Will Not End Well!

[lonely bird]

11. The alleged onshoring will...

Be low tech manufacturing. We will become the world’s sweatshop.

[Ol Janx Spirit]

13. What MAGA seems to completely fail to understand is that--like a kid that got lucky and hit...

...a homerun in a high school baseball game one time and has based their entire life on being a sports hero of some kind--America did not come to dominate the 20th century through its own hard work and ingenuity. America was the fortunate recipient of world events and two vast oceans that helped shield her from the worst effects of two brutal world wars.

Being able to eventually--and reluctantly--step in and save the world through a manufacturing base that had been geographically protected from the wars and then benefitting from being the better option for the German scientists that we snapped up to help us dominate the science arena in the post-WWII world was the secret sauce of America's success.

Certainly, the potential was there for America to be a global leader by the end of the 19th century, but without the chaos in Europe and the acquisition of the scientific minds and technology coming out of Europe through the dual conflicts it is highly unlikely that America would come to be the dominant superpower of the 20th century--nor would it have probably even had the aspiration to do so given the isolationist trends of the day in America. The world wars would completely change the paradigm and the future of the U.S.

Barring what is happening in Russia and Israel today, the rest of the world does not seem poised to make that mistake again soon. The irony is that the MAGA movement that currently dominates American policy is actually poised to cede everything that could have kept America on the top of the heap. Far from being on the field to even accidentally hit another homerun to brag about, America seems to have decided that even playing with a bat is too much to ask--so I guess we will just take our toys and go home and brag some more about that one time we hit a homerun....

[Mr.Bee]

15. We Have Three Great Problems Plaguing The World Today

Putin, Netanyahu, and Trump.
No peace. Endless Wars.

[SpankMe]

16. The CHIP's and Inflation reduction acts put some of the author's policy proposals into action

But the Big Fuck Bill, along with irrational tariffs, cancelled most of that out in favor of trying to bring big coal and small appliance assembly plants back to America.

Trump and Enterprise Institute are slowly drowning America in a bathtub. I can't tell if they're doing this on purpose for some nefarious reason, or if they think their policies will actually work and are just deluded.

[Mysterian]

17. With incompetent leadership and a failing education system

the U.S.A. is falling rapidly in every category. Thanks to a thoroughly corrupt republican party and its mindless supporters.

[LudwigPastorius]

19. We are turning into Russia.

...a former superpower, now dictatorial oligarchy, that is only relevant because it has nukes.

Only difference is that the one export we have going for us that the world seems to want is crappy movies.

China is ascendant, and will rule the rest of the 21st century.