The United States is hemorrhaging millions of jobs as a result of the nation’s growing trade deficit, largely with China, according to a report issued March 23 by the Economic Policy Institute (EPI). Contrary to conventional wisdom, high-tech industries are losing jobs faster than any other sector of the economy, the Alliance for American Manufacturing (AAM) pointed out.

Since China joined the World Trade Organization (WTO) in 2001, 2.4 million jobs have been lost or displaced in the United States as a result of the burgeoning trade deficit with that nation, the report concludes.

Growing trade deficits cost jobs in every state and congressional district (CD), the report found, including the District of Columbia and Puerto Rico. The computer, electronic equipment and parts industries experienced the largest growth in trade deficits with China, resulting in 628,000 job losses – 26 percent of all jobs displaced by trade between 2001 and 2008. 

The EPI report is the first to break down job losses to the congressional district level. Using the EPI data, AAM created an interactive map showing the impact by CDs. The hardest-hit districts were located in California and Texas, where remaining jobs in these industries are concentrated, and also in North Carolina, which was hit by job displacement in a variety of manufacturing industries. Other populous states like New York and Illinois also had major job losses.

“China’s cheating is causing America to lose more than just the capacity to make widgets in the one-sided trade arrangements with China,” said AAM executive director Scott Paul. “Sophisticated electronics and high-tech products that once were made in the United States are increasingly being made in China instead. We are losing more and more of these good jobs.”

The report cites China’s currency manipulation as a major cause of the growing U.S. trade deficit with that nation. China has tightly pegged its currency to the dollar at a rate that encourages a large bilateral surplus with the United States. Other causes of the deficit include massive industrial subsidies in China, lax labor and environmental law enforcement, intellectual property theft and piracy and Chinese policies that block market access to U.S. firms.  

“This intervention makes the yuan artificially cheap and provides an effective subsidy on Chinese exports,” said Robert E. Scott, EPI’s director of international programs, who authored the report. “Unless China raises the real value of the yuan by at least 40 percent and eliminates other trade distortions, the U.S. trade deficit and job losses will continue to grow rapidly.”

“Currency manipulation may sound like a highly technical subject, but its impact is simple,” AAM’s Paul said. “U.S. exports to China cost up to 40 percent more in China and Chinese exports to our consumers enjoy a subsidy of a similar amount. That’s unfair and unacceptable.” AAM is supporting efforts by Congress to penalize currency manipulation, and has urged the Obama administration to acknowledge that China is a currency manipulator, in the Treasury Department report due April 15.

The impact of the China trade deficit is not restricted to the jobs displaced, the report found. Competition with low-wage workers from less-developed countries also has driven down wages for other workers in manufacturing and reduced the wages and bargaining power of similar workers throughout the economy—essentially all production workers with less than a four-year college degree, roughly 80 percent of the private-sector workforce.

For a typical full-time, median-wage earner in 2006, these indirect losses reduced their annual income by approximately $1,400, according to earlier studies conducted by EPI. China is the most important source of downward wage pressure from trade with less-developed countries, because it pays very low wages. For example, the report notes, China was responsible for nearly 40 percent of the U.S. non-oil imports from less-developed countries in 2008.

“These findings document what we have been asserting for some time,” Paul said. “China is undercutting the competitiveness of our manufacturers and undermining the earning power of American workers by routinely failing to honor its global and bilateral commitments.”

China’s share of the U.S. trade surplus has soared, especially in 2009. Since China entered the WTO in 2001, the U.S. trade deficit with China has risen by $186 billion, from $84 billion in 2001 to $270 billion in 2008, an average increase of $26.6 billion per year. Last year alone, China was responsible for more than 80 percent of the United States’ total, non-oil trade deficit in goods.  

The congressional districts suffering the worst job losses were concentrated in states heavily exposed to growing China trade deficits in computer and electronic products and such other industries as furniture, textiles and apparel. Of the top 20 hard-hit districts, those suffering the worst damage were:

  • Eight CDs in California (the 13th, 14th, 15th, 16th, 31st, 34th, 47th and 50th), where a total of 370,000 jobs have been lost statewide – the worst hit was located in the Silicon Valley region of the Bay area;
  • Four CDs in North Carolina (the fourth, fifth, sixth and 10th), where 95,100 jobs have been lost statewide;
  • Three CDs in Texas (the third, 10th and 31st), where 193,700 have been lost statewide:
  • Two CDs in Massachusetts (the third and fifth), where 72,800 jobs have been lost statewide; and
  • One CD each in Oregon (first), Georgia (ninth) and Alabama (fifth), each of which has lost more than 8,600 jobs.

Rapidly growing imports of computers and electronic parts accounted for more than 40 percent of the $186 billion increase in the trade deficit with China between 2001 and 2008. The $73 billion deficit in advanced technology products with China contributed to the elimination of the 628,000 jobs in computer and electronic products in this period.

The CD job model is based on new data from the Census Bureau’s American Community Survey (ACS), which provides a much richer dataset for analyzing the effects of trade on employment than the Census Bureau’s Current Population Survey (CPS) used in prior EPI studies. Because of its large sample size of 3 million addresses per year, the ACS allows for the enhancements of the models for labor force estimates at the state and sub-state levels, the Census Bureau says.

Learn more.

The Alliance for American Manufacturing is a unique non-partisan, non-profit partnership forged to strengthen manufacturing in the U.S. AAM brings together a select group of America’s leading manufacturers and the United Steelworkers to promote creative policy solutions on priorities such as international trade, energy security, health care, retirement security, currency manipulation, and other issues of mutual concern. For more information, visit www.americanmanufacturing.org.