America survived the ‘China Shock.’ There’s still the Trump shock.

For years, U.S. economic policy has been greatly shaped by the idea of the “China Shock.” The term, coined by three economists in a 2016 paper, captures the widespread belief that trade with China resulted in the deindustrialization of significant parts of the United States and the loss of huge numbers of manufacturing jobs. It has fueled much of President Donald Trump’s trade policy and President Biden’s new industrial policy, both premised on the notion that China presents a serious challenge to the United States’ economic position in the world. It is increasingly clear that that challenge has been overcome. The other disruption to the American system — the Trump shock — has not.

There are debates as to whether the China Shock was as strong as initially suggested. I wonder whether it should really have been called the Globalization Shock. Many of the Western manufacturing jobs that were lost would have gone to other emerging markets if they had not gone to China. In any event, most agree that the China Shock ended about 15 years ago. But its political effects remain strong, even though the story in China is now completely different.

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