U.S. Markets open in 2 hrs 27 mins

Growing China trade deficit has cost 3.7M American jobs, study finds

The growing goods trade deficit between the U.S. and China has cost America 3.7 million jobs between 2001 and 2018, according to new data from the Economic Policy Institute (EPI).

Sino-American relations have entered a delicate phase, after the two sides struck a provisional deal that will lead to an extended round of negotiations about a range of thorny issues.

The EPI data underscores how high those stakes are, pointing out that “the growing trade deficit with China isn’t just a post-recession phenomenon hitting manufacturing: it has cost the U.S. millions of jobs throughout the economy since China entered the World Trade Organization (WTO) in 2001, a finding validated by numerous studies.”

Those figures include 700,000 jobs lost during the first 2 years of the Trump administration, the EPI stated — despite the president’s increasingly tough trade policies meant to stanch an outflow of U.S. jobs.

Since 2001, the gap between what the world’s two largest economies exchange in goods and services has only ballooned — from $83 billion to a staggering $419.5 billion in 2018. The EPI noted that increase represents an average annual rate of growth of 10%.

During this time period, U.S. exports to China did grow rapidly, from $19 billion to $120 billion in 2018. But that was outstripped by Chinese imports which increased far more dramatically — rising from $102.3 billion in 2011 to $539.2 billion in 2018.

A greater percentage of the increase in the goods trade deficit occurred during the last decade, in spite of the Great Recession. From 2008 to 2018, the deficit spiked 57.5% — a total of $153.2 billion as America’s appetite for inexpensive Chinese goods remained voracious.

That growth occurred at a time when the U.S. deficit with the rest of the world declined by 17.7%, the EPI data showed. 

These growing deficits have had a large impact on jobs here in the United States. “Each $1 billion in exports to another country from the United States supports some American jobs,” the report noted, but, “each $1 billion in imports from another country leads to job loss.”

Manufacturing taking a hit

The study illuminates the interplay between exports, imports and employment — showing how in some instances, Chinese imports undercut what would have resulted in American jobs being created. That effect has been magnified by China’s ascension to the WTO.

On average, “232,000 jobs per year have been lost or displaced since China’s entry into the WTO,” it said.

Manufacturing jobs have been the hardest hit by the rising trade deficit with China. Over 75% of all jobs lost — 2.7 million in total — were lost in that sector, which is less than 15% of the U.S. economy.

The largest job displacements were found in the computer and electronic parts industry, which lost more than 1.3 million jobs, or 36% of the total jobs lost.

The EPI also found that if U.S. exports to China had kept pace with imports, “it would have supported the creation of millions of U.S. manufacturing jobs, and prevented much of the collapse of overall U.S. manufacturing employment.” 

Regional losses

While all 50 states and Washington D.C. experienced job losses, some states were hit harder than others. Job losses ranged from .85% to 3.66% of total state employment; New Hampshire, Oregon, California, North Carolina, Minnesota comprised the top 5 hardest hit states. 

Thanks to the heavy losses in computer and electronic parts, California experienced the largest absolute job loss, with over 650,000 jobs lost — with 3 key Congressional districts accounting for nearly 45% of all the job losses in the area.

Wages also took a hit, accounting for a “direct net wage loss” of $37 billion a year due to trade with China. That’s because those who lost jobs in the lucrative import and export industries found jobs in non-trade related industries which pay far less — around 23% less, according to EPI data.

Lower wage workers, or those without college degrees, suffered the most. The 100 million workers without a college degree suffered average losses of $1,800 a year, EPI noted — a national loss of $180 billion.

Kristin Myers is a reporter at Yahoo Finance. Follow her on Twitter.

Read more:

Bernie Sanders 'Medicare for all' plan could shrink GDP by as much as 24%

House bill to reshape credit reporting, help borrowers improve scores

Second Trump term would be ‘positive’ for economy and financial markets: report

Washington, D.C. sues Trump’s inaugural committee for abusing funds

Trump withholding aid to Ukraine illegal, says Government Accountability Office

Read the latest financial and business news from Yahoo Finance

Follow Yahoo Finance on TwitterFacebookInstagramFlipboardLinkedIn, YouTube, and reddit.