‘China Shock 2.0’ Is Coming for the US Economy, Trade Analyst Predicts

Shipping containers, including one labelled "China Shipping" and another "Italia," are stacked at the Paul W. Conley Container Terminal in Boston on May 9, 2018. Brian Snyder/Reuters

Michael Stumo, the CEO of the Coalition for a Prosperous America, is predicting U.S. markets could soon see a massive influx of cheap products produced by Chinese firms in an event similar to the “China Shock” era of the early 2000s.

“We had China shock 1.0 after China was let into the [World Trade Organization] in 2000. This is China Shock 2.0,” Mr. Stumo explained during an interview with NTD’s “Capitol Report” on Thursday.

The Coalition for a Prosperous America is a non-profit organization focused on domestic production and jobs that has emphasized “quality employment, national security, and domestic self-sufficiency over cheap consumption.” As the organization’s CEO, Mr. Stumo is watchful for trade trends that impact U.S. workers and firms, and he’s warning surging Chinese imports pose a challenge for the United States.

“We’re going to have an auto apocalypse for our companies here if we don’t do something, or a solar apocalypse. We’re building solar here—all the solar tariffs—they’re just climbing right over, they’re undercutting, and they’re taking out the U.S.-based solar companies,” he said. “So it’s a real bad situation, and it’s going to get worse, and President Biden has to pay attention.”

The Chinese regime has stated its goal of growing the Chinese economy by 5 percent this year. Mr. Stumo believes limited consumer demand in China, and slowing infrastructure projects, will put heightened pressure on the country to meet these economic growth targets by expanding exports.

“They’re going to displace a ton of Western production,” the trade analyst said of the Chinese export trends.

He predicted the United States will be a prime target for these Chinese exports.

“Europe doesn’t want it. Japan doesn’t want it. The U.S. is the only country big enough and dumb enough to take it so far, mostly,” Mr. Stumo said.

President Donald Trump raised tariffs on imports from China during his presidency and these tariffs have remained intact under President Joe Biden. Still, Mr. Stumo said Chinese firms are finding ways to get around these tariffs, including by shipping their exports through other countries or establishing affiliated factories in Mexico and even in the United States.

“You’re seeing Chinese solar companies built in Pataskala, Ohio, in Texas, in Florida, and trying to take advantage—and are, and will—of [U.S. Inflation Reduction Act] tax credits,” he said. “So we subsidize their plants here, even as they subsidize them from there. And they’re not profitable, they just get the money from the government.”

How ‘China Shock 1.0’ Impacted The US Economy

The term “China Shock” was popularized by a 2016 research paper by economists David H. Autor, David Dorn, and Gordon H. Hanson that analyzed how U.S. and European labor markets were impacted by China’s accession to the World Trade Organization. The authors concluded that a period about 2.4 million U.S. manufacturing jobs were lost between 1999 and 2011 as a consequence of China’s entry into the WTO.

Some economic analysts have offered differing views of the impact of the “China Shock” period of the 2000s, projecting U.S. job losses were fewer than the 2016 “China Shock” paper’s authors projected, and even offset by job growth on the U.S. side.

A 2017 research paper by economists Robert C. Feenstra and Akira Sasahara, for example, estimated about 2 million U.S. jobs were lost during the “China Shock” period, while about 6.6 million U.S. jobs were created from growth in U.S. exports during this same period.

Authors Scott Lincicome and Arjun Anand, of the libertarian-oriented CATO Institute policy think tank, concluded in a December 2023 report that while certain U.S. manufacturing jobs were lost and some communities may been disproportionately impacted, “the depth and breadth of these losses remains subject to intense scholarly debate—especially after considering preexisting economic trends, gains in American service jobs, benefits for consumers (families and companies), and increased US exports.”

The CATO Institute authors asserted that Trump-era trade tariffs against Chinese imports didn’t reverse losses in the U.S. manufacturing sector and instead contributed to net manufacturing job losses in the United States.

The Tax Foundation, another policy think tank, also opposes using tariffs as a means to protect the U.S. economy.

“Tariffs are ultimately paid for in large part by consumers and businesses in the domestic economy, can lead to stagnation as protected industries are shielded from competitive pressures, and invite retaliatory tariffs from other nations that come with additional costs,” the Tax Foundation author Erica York wrote in a December 2021 article criticizing both President Trump and President Biden for maintaining tariffs on Chinese goods.

From NTD News