China trade deal will not restore 3.7 million U.S. jobs lost since China entered the WTO in 2001

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The White House has announced plans for a ceremony to sign a “phase one” trade deal with China on Wednesday, although details of the agreement have yet to be announced. As one analyst noted, this deal may not amount to more than a hill of soybeans. It is unlikely to significantly reduce massive U.S. job losses due to growing U.S. trade deficits—the difference between imports and exports—which are dominated by trade deficits in manufactured goods. As shown in a forthcoming EPI report to be released later this month, growing U.S. trade deficits with China eliminated 3.7 million U.S. jobs between 2001 and 2018 alone (see Figure A), including 2.8 million jobs in manufacturing (details will be provided in the forthcoming report).

U.S. jobs displaced by the growing goods trade deficit with China since 2001 (in thousands of jobs)Year
 Jobs displaced (thousands)
2001
0.0 
2002
218.1
2003
445.7
2004
852.1
2005
1,306.1
2006
1,651.5
2007
1,964.5
2008
2,030.4
2009
1,686.2
2010
2,295.0
2011
2,616.8
2012
2,764.6
2013
2,812.3
2014
2,993.2
2015
3,197.9
2016
2,965.2
2017
3,339.8
2018
3,704.7
ChartData Download dataThe data below can be saved or copied directly into Excel.
The data underlying the figure.

Source: Authors’ analysis of U.S. Census Bureau American Community Survey data, Bureau of Labor Statistics Employment Projections program data, and U.S. International Trade Commission Interactive Tariff and Trade DataWeb database. Adapted from Rob Scott and Zane Mokhiber, Growing China Trade Deficits Cost 3.7 Million American Jobs between 2001 and 2018, Economic Policy Institute, forthcoming.

Trade deficits and jobs losses with China continued to grow during the first two years of the Trump administration—despite the administration’s heated rhetoric and imposition of tariffs. The U.S. trade deficit with China rose from $347 billion in 2016 to $420 billion in 2018, an increase of 21.0%. U.S. jobs displaced by those China trade deficits increased from nearly 3.0 million jobs lost in 2016 to 3.7 million jobs lost in 2018, an increase of more than 700,000 jobs lost or displaced in the first two years of the Trump administration.
Although the bilateral trade deficit with China has declined in 2019 (through November), the overall U.S. trade deficit in non-oil goods, which is dominated by trade in manufactured and farm products, has continued to increase, suggesting that trade diversion has grown in importance. These are important topics for future research.
While growing exports support some American jobs, growing imports eliminate existing jobs and prevent new job creation—as imports displace goods that otherwise would have been made in the United States by domestic workers. As a result, growing trade deficits result in increasing U.S. job losses. The top half of Table 1 shows just how much the trade deficit has grown: The U.S. trade deficit with China increased from $83.0 billion in 2001 to $420 billion in 2018. While U.S. exports to China increased in this period, growing exports were overwhelmed by the massive growth of imports from China, which increased by $437 billion in this period. 
U.S. trade deficits with China displaced 956,700 jobs in 2001 when China entered the World Trade Organization (WTO) and the number of jobs lost due to the trade deficit increased to 4,661,400 in 2018, leading to a net 3.7 million jobs lost, as shown in the bottom half of Table 1.

U.S.–China goods trade and job displacement, 2001–2018

Change ($billions)
Percent change

2001
2008
2018
2001–2018
2008–2018
2001–2018
2008–2018
U.S. total exports*
$19.2
$71.5
$120.1
$100.9
$48.7
524.6%
68.1%
U.S. general imports
$102.3
$337.8
$539.2
$437.4
$201.9
427.6%
59.8%
U.S. trade balance
‑$83.0
‑$266.3
-$419.5
-$336.5
-$153.2
405.2%
57.5%
Average annual change in the trade balance

-$19.8
-$15.3
10.0%

Change (thousands of jobs)
Percent change
U.S. total exports—jobs supported
175.8
561.9
885.9
710.1
324.0
403.9%
57.7%
U.S. general imports—jobs displaced
1,132.5
3,548.9
5,547.2
4,414.8
1,998.4
389.8%
56.3%
U.S. trade deficit—net jobs displaced
956.7
2,987.0
4,661.4
3,704.7
1,674.3
387.3%
56.1%
Average annual change in net jobs displaced

217.9
167.4
9.8%
* Total exports as reported by the U.S. International Trade Commission include re-exports. The employment estimates shown here are based on total exports.
Source: Authors’ analysis of U.S. Census Bureau American Community Survey data, Bureau of Labor Statistics Employment Projections program data, and U.S. International Trade Commission Interactive Tariff and Trade DataWeb database. Adapted from Rob Scott and Zane Mokhiber, Growing China Trade Deficits Cost 3.7 Million American Jobs between 2001 and 2018, Economic Policy Institute, forthcoming.

The single most important cause of growing trade deficits with China is its history of currency manipulation and dollar misalignment that has persisted for more than two decades. And yet, the reported deal will provide extremely unfavorable terms for the United States on exchange rates, essentially locking in the current exchange rate. This deal is a step backwards on currency manipulation and misalignment.
Despite all of the tariffs and other restrictions imposed on China trade by the Trump administration, the bilateral trade deficit continued to grow between 2016 and 2018, resulting in the loss of more than 700,000 U.S. job opportunities. It remains to be seen whether bilateral and global trade balances improve in the wake of the phase one trade agreement with China, and future trade deals to come. But the phase one trade deal does not appear to address the key structural concerns with the long-term imbalance in trade between the United States and China.

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