Also, the findings ten years ago were surprising. Major economists had long argued that free industry was nevertheless a good thing, though there might be some winners and losers, it would usually provide lower prices and common prosperity. Therefore, in 2013, a group of academic researchers established conclusively that the onset of Chinese trade in the early 2000s and the resulting wave of cheap goods had been a devastating disaster for many US areas, destroying their manufacturing industry.

The benefits of what in 2016 they called the” China impact” were gut-wrenching: the loss of 1 million US manufacturing jobs and 2.4 million work in full by 2011. Worse, these losses were disproportionately concentrated in what the economists referred to as” trade-exposed” towns and cities ( think furniture manufacturers in North Carolina ).

If in fact all that seems obvious, it’s only because the study by David Autor, an MIT work scholar, and his colleagues has become an accepted, albeit often distorted, social tale these days: China destroyed all our production jobs! The findings help at least some of today’s social upheaval, even though the details of the study are frequently ignored. It’s reflected in rising calling for US isolationism, President Trump’s large taxes on imported goods, and memories for the lost days of domestic production splendor.

The effects of the initial impact in China also wreak havoc on a large portion of the nation. But Autor is now concerned about what he considers a far more serious problem—what some are calling China impact 2.0. He warns that the US is in danger of losing the next major manufacturing challenge, this time over innovative technologies that make vehicles and flights as well as those that enable AI, quantum technology, and fusion energy.

Lately, I asked Autor about the lingering effects of the China impact and the training it holds for tomorrow’s production problems.

How are the effects of the China shock still being felt?

I have a recent paper looking at 20 years of data, from 2000 to 2019. We attempted to ask two related queries. One, if you looked at the places that were most exposed, how have they adjusted? How have people changed if you examine the people who are most exposed? And how do those two things relate to one anothe

You’re able to get two very different responses, it turns out. If you look at places that were most exposed, they have been substantially transformed. Once manufacturing stops, it never recovers. But after 2010, these trade-impacted local labor markets staged something of an employment recovery, such that employment has grown faster after 2010 in trade-exposed places than non-trade-exposed places because a lot of people have come in. However, these are mostly in low-wage occupations. They’re in K–12 education and non-traded health services. They work in logistics and warehousing. They’re in hospitality and lodging and recreation, and so they’re lower-wage, non-manufacturing jobs. And they are carried out by a whole new team of professionals.

The growth in employment is among women, among native-born Hispanics, among foreign-born adults and a lot of young people. A very different demographic, but especially white men, who were most prominent in manufacturing, is staging the recovery. They have not really participated in this renaissance.

Employment is expanding, but are these regions prospering?

They have a lower wage structure: fewer high-wage jobs, more low-wage jobs. If your definition of prospering is quickly rising incomes, they are not, therefore. But there’s a lot of employment growth. They are not like abandoned cities. But then if you look at the people who were most concentrated in manufacturing—mostly white, non-college, native-born men—they have not prospered. The majority of them have not yet switched to manufacturing.

One of the great surprises is everyone had believed that people would pull up stakes and move on. In fact, we discover the very opposite. People in the most adversely exposed places become less likely to leave. They have lost their mobility. The presumption was that they would just relocate to find higher ground. And that’s completely different from what happened.

What happened to the total number of manufacturing jobs?

There hasn’t been a rebound. Once they go, they just keep going. Not in the sectors that China abandoned, but if there is going to be new manufacturing, it will be in those sectors. Those were basically labor-intensive jobs, the kind of low-tech sectors that we will not be getting back. You know: consumer goods like furniture and assembly, footwear, and construction materials. The US wasn’t going to keep them forever, and once they’re gone, it’s very unlikely to get them back.

It’s easy to see a link between the dynamics you’re describing, such as white-male manufacturing jobs leaving and new jobs being created by immigrants, and the political unrest of today.

We have a paper about that called” Importing Political Polarization”?

How much of a factor do you think it plays in the political unrest of today?

I don’t want to say it’s cel/cea/cei/cele factor. There were many other things taking place, in addition to cel/cea/cei/cele China trade shock, that was cel/cea/cei/cele catalyst. It would be a vast oversimplification to say that it was cel/cea/cei/cele sole cause.

However, the majority of people no longer work in manufacturing. Aren’t these impacts that you’re talking about, including the political unrest, disproportionate to the actual number of jobs lost?

These are jobs in settings where manufacturing is the mainstay. Manufacturing is very unevenly distributed. It’s different from the grocery stores and hospitals you can find in every county. The impact of the China trade shock on these places was like dropping an economic bomb in the middle of downtown. You wouldn’t really notice it if the China trade shock had created a few million jobs, and these were just the people who worked in the food and retail stores, the hospitality industry, and trucking. We lost lots of clerical workers over the last couple of decades. Nobody talks about a clerical shock. Why not? There was never, after all, a clerical capital of America. Clerical workers are everywhere. If they decline, it doesn’t completely destroy a place’s foundation.

So it goes beyond the jobs. These locations have lost their identity.

Maybe. However, it also involves jobs. Manufacturing offered relatively high pay to non-college workers, especially non-college men. It served as a model for a way of life.

And we’re still seeing the damage.

Yes, absolutely. It’s been 20 years. What’s amazing is how stasis manifests among those who are most exposed, not in the places but among the people. Though it’s been 20 years, we’re still feeling the pain and the political impacts from this transition.

It has obviously already entered the country’s consciousness. Even if it weren’t true, everyone now believes it to have been a really big deal, and they’re responding to it. It continues to influence policy and political resentments, perhaps even out of proportion to its economic significance. It certainly has become mythological.

What worries you right now?

We’re in the midst of a totally different competition with China now that’s much, much more important. We’re not talking about tube socks or common furniture at all. We’re talking about semiconductors and drones and aviation, electric vehicles, shipping, fusion power, quantum, AI, robotics. These industries are extremely threatened, but the US still maintains competitiveness there. China’s capacity for high-tech, low-cost, incredibly fast, innovative manufacturing is just unbelievable. And the Trump administration is actually engaged in a conflict from 20 years ago. The loss of those jobs, you know, was devastating to those places. The US economy as a whole was not harmed by it. If we lose Boeing, GM, and Apple and Intel—and that’s quite possible—then that will be economically devastating.

Some people, in my opinion, refer to it as China shock 2.0.

Yeah. And it is already moving forward.

When we think about advanced manufacturing and why it’s important, it’s not so much about the number of jobs anymore, is it? Is it more about developing the newest technologies?

It does create good jobs, but it’s about economic leadership. It’s about creativity. It’s about political leadership, and even standard setting for how the rest of the world works.

Should we just accept that manufacturing is no longer a major source of employment and move on?

No. Still, do you have 12 million jobs? Instead of the fantasy that we’re going to go back to 18 million or whatever—we had, what, 17.7 million manufacturing jobs in 1999—we should be worried about the fact that we’re going to end up at 6 million, that we’re going to lose 50 % in the next decade. And it’s certainly possible. And the Trump administration is doing a lot to help that process of loss along.

It accounts for 8 % of employment given that we have a workforce of over 160 million people. It’s not zero. You shouldn’t therefore believe it to be too minor to worry about. It’s a lot of people, it’s a lot of jobs. It’s a lot of what has helped this nation be a leader, though, which is more important. So much innovation happens here, and so many of the things in which other countries are now innovating started here. The US has always had the tendency to innovate in certain areas before losing them after a while before moving on to the next step. But at this point, it’s not clear that we’ll be in the frontier of a lot of these sectors for much longer.

So we want to revive manufacturing, but we want to do it in the right way: through advanced manufacturing.

The notion that we should be assembling iPhones in the United States, which Trump wants, is insane. That work is not desired by anyone. It’s horrible, tedious work. It earns a lot, very little. And if we actually did it here, it would make the iPhones 20 % more expensive or more. Apple might choose to pay a 25 % tariff as opposed to producing the phones here. If Foxconn started doing iPhone assembly here, people would not be lining up for that job.

However, we do need new employees entering the manufacturing industry at the same time.

But not că manufacturing. not a tedious, mind-numbing, and eye-trainer-inducing assembly.

We need them to do high-tech work. Manufacturing is a skilled trade. We need to build airplanes better. That requires a lot of skill. Assembling iPhones does not.

What are your top priorities for avoiding China shock 2.0?

I would choose sectors that are important, and I would invest in them. I don’t believe that industrial policies or tariffs are ever justified. I just don’t think protecting phone assembly is smart industrial policy. We must genuinely improve our capacity to produce semiconductors. I think that’s important. We must maintain our composure in the auto industry, which is crucial. We need to improve aviation and drones. That is crucial. We need to invest in fusion power. That is crucial. We need to adopt robotics at scale and improve in that sector. That is crucial. I could come up with 15 things where I think public money is justified, and I would be willing to tolerate protections for those sectors.

What lessons can be drawn from the opening of global trade in the 2000s and the China shock?

We did it too fast. We pretended it wasn’t going on, and we didn’t do enough to support people.

When we started the China shock research back around 2011, we really didn’t know what we’d find, and so we were as surprised as anyone. However, the work has altered our own way of thinking and, in my opinion, has been beneficial. Not just because it has made it easier for everyone to do the right thing, but it also has at least made people start asking the right questions.

What do the findings tell us about China shock 2.0?

I believe that US is failing to address that issue. The problem is much more serious this time around. In reality, we are aware of the threats. And yet we’re not seemingly responding in a very constructive way. The issue is that it doesn’t seem to be generating very serious policy responses, despite the fact that we now know how seriously we should take this. We’re generating a lot of policy responses—they’re just not serious ones.