China shock

The China shock (or China trade shock) is the impact of rising Chinese exports on manufacturing employment in the United States and Europe after China's accession to the World Trade Organization in 2001. Studies have estimated that the China trade shock reduced U.S. manufacturing employment by 550,000 (explaining about 16% of the total decline in manufacturing employment in the U.S. between 2000 and 2007), 1.8-2.0 million, and 2.0-2.4 million. Losses in manufacturing employment have also been observed in Norway, Spain, Canada, and Germany. Studies have shown that there was "higher unemployment, lower labor force participation, and reduced wages in local labor markets" in U.S. regions that have industries that competed with Chinese industries.

A 2023 review of existing economic research concluded that US-China trade since the early 2000s caused aggregate welfare gains in both countries; had winners and losers in the US; and was not a leading cause of manufacturing employment decline in the US. However, economists note that the real harm of the China shock was in the rapid economic changes that came with it for communities and workers.

Experts have argued that the China trade shock has ended. In relation to consumer goods, the China shock largely ended by 2006 or 2007 while indicating that for capital goods the effects of Chinese imports to the United States continued up until 2012 and are ongoing in specific product categories. Some politicians have called for protectionism to reverse the China shock, but economists have expressed skepticism that protectionism will bring back manufacturing jobs en masse. Economists have also noted that extreme protectionist measures risks repeating the harms of the China shock by causing rapid economic change for the worse.

In 2025, the Financial Times reported that China was experiencing its own form of a China shock, as employment in labor-intensive manufacturing was declining, as firms were increasingly opting for automation or shifting their manufacturing to countries with cheaper labor, such as Vietnam and Indonesia.