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Why economists got free trade with China so wrong

Planet Money

2025/12/30
Planet Money

Planet Money

2025/12/30
The promise of free trade once dominated economic thinking, with experts touting its benefits for growth and efficiency. But when the floodgates opened to Chinese imports in the early 2000s, the reality on the ground told a different story—one of shattered communities, stagnant careers, and lasting economic scars.
The surge in U.S.-China trade after 2001 led to devastating job losses in American manufacturing, particularly in regions unprepared for global competition. Contrary to economic theory, displaced workers rarely found new footing—many left the labor force entirely or faced long-term underemployment. Research by David Autor reveals these impacts were not temporary setbacks but persistent shocks that reshaped local economies and fueled political upheaval. The so-called 'China shock' exposed flaws in mainstream models that assumed smooth worker transitions and overlooked regional vulnerabilities. Even policies like Trade Adjustment Assistance proved insufficient against the scale of disruption. While tariffs under Trump failed to revive industry, they highlighted the need for smarter strategies: combining targeted trade protections with investments in innovation and high-tech sectors. Today, the legacy of this era underscores a bleaker, more nuanced understanding of globalization’s human cost—and its role in rising populism.
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Free trade was supposed to benefit everyone, but displaced workers often never recovered.
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The China trade shock hit localized manufacturing sectors hard, causing long-term joblessness.
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Manufacturing decline in exposed areas led to lasting worker hardship despite regional recovery.
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The China shock paper resonated with the rise of Trumpism
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Tariffs did not benefit U.S. manufacturing but raised prices