Until the 1990s, western North Carolina was the center of the U.S. furniture industry. Laid-off steelworkers from West Virginia, Tennessee, and beyond trucked over the Blue Ridge Mountains for jobs making tables, dressers, and beds for American homes. They knew they had arrived at Hickory, Lenoir, and other furniture-making towns by the smell of wood lacquer in the air.
The elegant headquarters of Broyhill Furniture was the area’s unofficial capital. Locals called the white brick building, fronted by columns and set in a fifty-acre park, “the White House.” A few years after China joined the World Trade Organization and its furniture exports wiped out thousands of local jobs, a Broyhill factory hand got fed up. He drove to work before his shift started and raised a Chinese flag over “the White House.”
What was happening in North Carolina was repeated across the nation. Business owners, starstruck by China’s unbeatable combination of shockingly cheap labor and a potentially enormous consumer market, jetted to Beijing, Shanghai, and Guangzhou to see what kind of business they could do there. The trade concessions that U.S. negotiators had wrung out of Beijing—lower tariffs, eased regulations, fewer subsidies for state-owned firms—made China a far more attractive place to invest and import made-in-China goods back home.
For many millions of Americans, U.S. business investment in China was a clear win. Clothing, toys, furniture, appliances, phones, computers, and hundreds of other goods stuffed the shelves at Walmart and Target at stunningly low prices. Between 2000 and 2017, average U.S. prices rose 47 percent. During the same period, there was little inflation in areas dominated by Chinese imports. Clothing prices didn’t rise, while prices for furniture tumbled by 18 percent, appliances by 24 percent, and phones and other telecommunications equipment by 75 percent. The imports also produced jobs in trucking, retail, logistics, marketing, and the many other industries that fuel the U.S. consumer economy.
But for workers in targeted industries, China’s rise was disastrous. During that same period, employment in furniture and appliance manufacturing fell by 42 percent, while clothing manufacturing employment plummeted 75 percent. Chinese imports focused on labor-intensive industries—sectors where workers rarely made it beyond high school, were poorly paid, and were unequipped for change. Many of the affected industries were clustered in the Appalachian region of the Southeast and smaller industrial cities in the Midwest.
Workers there were devastated. Some used government assistance to attend community college and try to figure out another field of work. But after years of factory work, wrenched backs, and bad knees, many other took a different route. They qualified for disability payments, a path that all too frequently led to opioids and other painkillers, and sometimes to drug overdoses.
Stuart Shoun, a mountain-sized Tennessee machinist who speaks with an Appalachian twang, says he took the Hillbilly Highway to North Carolina to work in wood. The saddest part of the layoffs, he says, was discovering that some of his colleagues were illiterate or could barely read and write. “There would be lots of tears,” he says, and some coworkers would ask his help deciphering severance forms handed out by factory bosses. “How would they even go out and fill out applications” for new jobs, Shoun asks.
For years, such complaints were largely ignored by the top echelons in business, academia, and government. They looked at China trade as good for the overall economy and an important way for the United States to remain at the top of the heap in international competition. Decades later, Donald Trump figured out a way to channel the frustration of those who were battered by China’s rise, while his many detractors wondered how things had gotten so out of hand.
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China almost seemed too good to be true, says Alex Shuford ⅠⅠⅠ, the chief executive of Century Furniture, a Hickory, North Carolina, firm that makes higher-priced goods. Not yet forty years old, he moved back from California around 2000 to join the family business. To the Shufords, China looked a lot like the United States after World War II, when Alex’s grandfather, a textile baron, opened a factory to sell furniture to millions of returning GIs and their families. The United States was a growth market; Depression-era parents rarely had furniture worth passing down to their children who were setting up house in the suburbs. Now the growth market was China. Hundreds of millions of Chinese laborers were moving away from peasant farming to city life, and they too would need furniture for their new apartments.
Before selling to the Chinese market, though, Century started to use Chinese workers to make less expensive furniture to sell to Americans, which it called “Destinations by Century.” Chinese laborers earned roughly 5 percent of what the Shufords paid in Hickory. Century flew North Carolina workers to China to show managers there how to produce furniture that had the look and finish U.S. consumers wanted. Many of Century’s competitors did the same. Importing Chinese-made furniture promised much fatter margins than producing domestically.
But the strategy proved risky. Import competition quickly drove down prices. The promise of fat margins evaporated, and brand images suffered. By training Chinese factories, U.S. furniture makers created competitors who started to sell directly to U.S. retailers.
“China came on faster than expected,” says Shuford. “They sustained it longer than expected and they adapted faster than expected because we helped them. It was like Ford helping Toyota to understand American tastes.”
By 2004, Century recognized the trap it had laid for itself. It started phasing out its import division and gave up competing with Chinese mass-produced goods. Instead, Century shifted to customized designs and offered hundreds of different finishes, which Chinese manufacturers, an ocean away, couldn’t match. It remade its factories through automation so it could profitably produce tables and chairs in smaller production runs.
The change helped Century survive, unlike dozens of other furniture makers that went broke or stopped making wood furniture. In the late 1990s, there were fifty wood furniture factories within fifty miles of Hickory; now there are perhaps a half dozen. Some of the abandoned structures were sold and demolished after their hardwood floors and ceilings were removed and used to make reclaimed-wood furniture.
Still, Century’s workforce paid a steep price. The company employed 1,323 people in 2003; now just 875. In Hickory’s Catawba County, the falloff was more severe. In 2001, when China joined the WTO, 14,203 people worked in county furniture factories. By 2010, the number had fallen 40 percent, to 8,117. In all of North Carolina, furniture manufacturing jobs declined by 55 percent between 2001 and 2010. Since then, furniture factory employment has picked up by only 10 percent in the county and state, despite a long U.S. economic recovery before the coronavirus pandemic.
Different industries in different communities fared just as poorly. Makers of electronics in San Jose, California, sporting goods in Orange County, California, costume jewelry in Providence, Rhode Island, shoes in West Plains, Missouri, toys in Murray, Kentucky, and lounge chairs in Tupelo, Mississippi, among many other industries, were felled by Chinese imports.
In Hickory, Stuart Shoun was laid off three times because of Chinese competition. The most galling was in 2005, when a Broyhill manager asked him to figure out how to machine a mirror that the company’s Chinese suppliers were having a tough time making. After he produced a sample, the company boxed up the forms, knives, and patterns and shipped them to China. “That got everyone mad at me—friends I had for fifteen years,” Shoun says, even though layoff notices had already gone out. “They thought it was my fault they were losing their jobs.”
Resentment grew against China and company executives. After Kroehler Furniture laid off sewing machine operators in nearby Conover, North Carolina, around 2001, a shipment of Chinese-made sofa covers arrived, which were mismeasured. Management asked the upholstery crew to return and repair the shipment. Half of them refused. “They said, ‘Cram it, you sent it to China. Let them fix it,’” says Shoun, who worked at Kroehler at the time.
After his Broyhill layoff, Shoun started attending community college in 2006, with tuition paid by a government program to retrain workers hurt by import competition, called Trade Adjustment Assistance. He made good grades and wanted to work as a draftsman designing homes. By the time he got out of school, though, the housing crisis was in full swing, making hash of his plans. Eventually he returned to the furniture industry and was laid off once more in 2018, at age sixty-one, and retired.
Shoun’s experience with the trade adjustment program, which paid for extended unemployment insurance payouts and two years of college tuition, wasn’t unusual. A 2012 evaluation ordered by the U.S. Labor Department found that program participants, especially those older than fifty, generally made less money four years after starting the program than those who didn’t sign up. The others went back to work more quickly.
Many who couldn’t get a job wound up collecting Social Security Disability Insurance, which provided income and health care, but required them to stay home to keep their benefits. Too often, disability led to painkillers and opioid addiction. In Hickory’s Catawba County, the percentage of workers collecting disability topped the state average after 2009. Opioid prescription rates ran about 40 percent to 50 percent higher than the average in North Carolina, as did the rate of deaths from drug overdose.
Academics debate whether layoffs and other economic shocks are responsible for the addiction scourge. Drug usage has been pervasive in furniture factories for years, say managers and workers. But layoffs meant more than a lost paycheck; they wreaked havoc on community life, especially in furniture factories where children followed parents into the plants. Gone were company picnics, softball teams, and bowling leagues. When a factory closes, “it’s like losing part of your family,” says Jackie Starnes, a former upholstery manager in the Hickory area. “You lose your golfing buddies and your fishing buddies.”
His older son, now in his mid-forties, was one of many to get laid off at furniture factories. Starnes doesn’t blame that for his son’s lifelong battle with drug addiction. He’s been in rehab eight times, he says, and is now clean. But with the layoffs, Starnes says, “you lose direction.”
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Why were the changes in blue-collar America so frequently overlooked?
Business executives had profit opportunities in China on their mind, not the concerns of workers at home. Having lobbied ferociously to get China into the World Trade Organization in 2001, they were ready to cash in. U.S. investment in China quadrupled to $20.9 billion in 2008 from 2000, according to Rhodium Group, a market research firm.
Some leaders of the lobbying campaign prospered. Boeing saw its China revenue jump from 2 percent of sales in 2000 to 13 percent in 2015. Although General Electric doesn’t break out China revenue, its Asia revenue increased from 10 percent of sales in 2000 to 16 percent in 2015. General Motors also doesn’t identify China revenue. But in 2009, as it battled bankruptcy, China was one of its few bright spots. Vehicle sales there nearly equaled sales in the United States. Earlier, U.S. car sales far outpaced China’s.
Apple Computer didn’t have enough sales in China or Asia to note them in financial filings in 2000. In 2015, China accounted for 24 percent of its revenue. Intel saw similar growth. Qualcomm technology became the global standard in cellular telephone technology after China adopted its system.
Others didn’t fare nearly as well. Of the ten members of the Rump Group—Boeing, GE, GM, and seven other companies that started lobbying in the mid-1990s for China to join the WTO—one died (Digital Equipment Corporation); another nearly brought down the global economy in 2008 and had to be rescued by the government (American International Group); and a third became a shell of itself (Eastman Kodak Company).
Motorola, another Rump Group member, had an especially tough time. In a 2010 lawsuit, the company accused Huawei Technologies of stealing its wireless network technology, but eventually dropped the suit, under pressure, when China’s Commerce Ministry investigated it for antitrust violations. In 2011, Motorola split into two companies. One, Motorola Mobility, was eventually sold to China’s Lenovo Group. The other, Motorola Solutions, sued a different Chinese company, Hytera Communications, for ripping off its technology. That dispute hadn’t been resolved by March 2020.
The corporate cheerleading for China died down in the wake of the global financial crisis of 2008, as China’s massive stimulus spending wound up leading to overproduction of commodities like steel, aluminum, and glass. The excess swamped foreign markets and clobbered domestic firms. Concern also escalated about Chinese firms pressuring foreign partners to hand over technology. American companies took note of how the Chinese began to dominate the market for high-speed trains. Around 2004, Kawasaki Heavy Industries and other Japanese and European bullet-train makers transferred know-how to China’s Railways Ministry and Chinese companies. Afterward, China train makers used the technology to become powerful competitors.1
The dampened enthusiasm was reflected in surveys of American businesses. In 2008, 64 percent of the members of the American Chamber of Commerce in China said they were optimistic about their two-year prospects in China. By 2014, that percentage had fallen by half. Still, corporate criticism of Beijing was rare. GE chief executive Jeffrey Immelt got widespread attention in 2010 when he complained to Italian executives at a dinner in Rome that China was becoming increasingly protectionist. “I am not sure that in the end they want any of us to win, or any of us to be successful,” he said, according to the Financial Times. But Immelt hardly stuck to his guns. GE quickly said his words were spoken in private and taken out of context. 2
There were plenty of examples of American companies kowtowing to Beijing. In 2018, Gap Inc. apologized for selling a T-shirt showing a map of China that didn’t include Taiwan. U.S. and other foreign airlines made sure their websites referred to Taiwan as a part of China after Chinese authorities objected. In 2019, a Houston Rockets executive quickly took down a tweet backing pro-democracy protests in Hong Kong, as the National Basketball Association tried to limit any damage to its brand on the mainland.
The corporate unwillingness to take on Beijing differed sharply from the 1980s and 1990s, when Japan was the target of U.S. economic concern, as we will see in the next chapter. Then some of America’s most famous business leaders—Lee Iacocca of Chrysler, Ross Perot of Electronic Data Systems, and Robert Galvin of Motorola—challenged Japan’s trade restrictions and domestic subsidies.
Back then, the United States complained that Japan closed its doors to American companies. That isn’t the case in China, where localities compete for foreign investment. U.S. executives in China complain privately that their companies face discrimination and threats. But they speak softly in public to make sure they don’t anger Chinese leaders, who have plenty of ways to make their lives miserable.
In 2015, companies started to push back more publicly after China published an industrial development plan called “Made in China 2025.” The report laid out strategies to master technologies in ten important sectors, including information technology, aerospace, robotics, and electric vehicles. In some ways, the report was similar to other long-range reports in a country that has produced a dozen or so Mao-style five-year plans. Many of them didn’t work out.
China has long looked to substitute domestically made products for imports, even if that means discriminating against foreign firms. In 2006, the government under President Hu Jintao mapped out a comprehensive blueprint to promote what it called “indigenous innovation,” to reduce China’s reliance on foreign technology and turn the country into a global leader of advanced manufacturing. “The National Medium- and Long-Term Plan for the Development of Science and Technology” heralded an era of increased policy bias for homegrown products but didn’t do much to advance China.
The Made in China report was different. It had specifics that ticked off foreigners. China aimed to have 40 percent market share in its chosen markets by 2020 and 70 percent by 2025. The only way to accomplish that, foreign executives figured, was through massive subsidies and technology theft. The European Union Chamber of Commerce in China was among the first to issue a call to arms. “The numbers attached to this initiative are staggering,” the group’s March 2017 report said. “It seems that the Chinese Government is determined to maintain a prominent role in guiding the economy.”3
Joerg Wuttke, the EU Chamber head who launched the report, was blunter. “It’s one thing to plan a road or a power plant in China,” he says. “It’s another thing to tell companies around the world that their market share will be reduced” because of Chinese inroads. The U.S. Chamber of Commerce published a similar report two days after the EU Chamber, as a one-two punch 4to get Beijing’s attention. Think tanks in Europe and the United States also joined in.
Although many Chinese leaders downplayed “Made in China 2025” and said they hadn’t bothered to read it, the report acted as a signal to provinces and cities to invest in the highlighted technologies. The U.S. Chamber later detailed how twenty-four provinces and municipalities used the report to set priorities and provide subsidies. In high-tech Guangdong province, the report said, local officials encouraged companies to become “backbone” robotics enterprises, create “secure and reliable” next-generation information technology systems, and establish the region as a “Made in China 2025” demonstration zone. The rust-belt province of Liaoning, where mining and machinery industries have struggled for years, provided subsidies for advanced manufacturing and scientific investment.
The Trump administration would later use the report as its main evidence that Beijing intended to replace the United States as the global economic leader and had to be stopped.
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Academics also underplayed the challenge to the United States from China’s rise, as did many journalists who rely on their work, including one of the authors of this book (Bob). Journalists and economists have a symbiotic relationship. Reporters act like frontline troops, ferreting out information and uncovering problems by traveling around the country and interviewing people caught in economic struggles. Academics use that work as raw material, but mainly base their research on economic data that can be years old. They produce studies journalists use to show that the anecdotes they collect are part of a significant trend.
From the vantage point of many journalists and academics, free trade with China, Mexico, and other developing nations was generally positive for the United States because consumers benefited through lower prices and product innovation. While many workers blamed trade for holding down wages or taking their jobs, newspaper and television stories, bolstered by academic research, frequently pointed out that the larger threat was automation. Robots and other new machinery reduce the need for factory hands, whether or not the United States trades with low-wage nations. “All the evidence points to the role of technology” as the workers’ problem, said Robert Z. Lawrence, a Harvard University professor, in a 1993 Wall Street Journal article by Bob. (This is not to pick on Lawrence; those views are typical of the economics profession and rightly point out the powerful role of technology in factory job loss.)
Some labor-backed economists predicted that 1 million jobs would be lost in the decade after China joined the WTO. Even if that was correct, it didn’t seem to be all that significant. That would amount to a loss of a 100,000 jobs a year in a labor force of more than 150 million people, where 3 million to 4 million workers quit their jobs every year. Worker hardship had to be weighed against consumer gain.
But that wasn’t the best way to think about the impact of China trade. It took three economists, in 2012, to make a powerful case that Chinese imports were doing far more harm than commonly understood. In “The China Syndrome: Local Labor Market Effects of Import Competition in the United States,” David H. Autor of the Massachusetts Institute of Technology, David Dorn of Centro de Estudios Monetarios y Financieros in Spain, and Gordon H. Hanson of the University of California, San Diego, demonstrated that the impact of China trade wasn’t spread evenly around the country.5 Instead it hit very specific industries very hard—furniture, clothing, costume jewelry, electronics, and others—and those industries tended to cluster in specific parts of the country. The disruptive power of Chinese imports devastated those communities, while many other parts of the country went largely untouched or benefited.
The three economists attributed a loss of 1.5 million manufacturing jobs to Chinese competition between 1990 and 2007, concentrated in industries that employ workers who rarely made it to college. In those regions, laid-off workers were far more likely to end up on disability than to try their hand at community college. In a later paper, they updated their estimates to 2.4 million jobs lost in manufacturing and services between 1999 and 2011—again concentrated in regions where industries were competing with Chinese goods.
Chinese imports to the United States had been climbing since the 1990s, so why did it take so long to arrive at this finding? Hanson has several explanations. On a technical level, it required a combination of different academic skills. Autor is a labor economist who looks at the United States as a series of very different local labor markets. Hanson is a trade economist who tracked the impact of Chinese imports on specific industries. Dorn is a stats whiz who figured out how to use U.S. Agriculture Department data that divides the country into about seven hundred commuting zones—groups of counties that share a labor market—to track the industry impact to specific regions. According to their data, the commuting zones surrounding Hickory and many other furniture-making parts of the country were in the top 5 percent of regions most affected by Chinese imports.
Hanson met Autor around 1999, when he was looking to hire the freshly minted PhD who wears Mr. Rogers–style cardigan sweaters. Autor chose a position elsewhere, but the two men, then in their mid-thirties, remained friends. The younger Dorn bonded later with Autor during a 2007 stint at MIT. A few years afterward, the three joined forces. “I could bring in the trade perspective and they could bring their hard-core, empirical labor data,” says Hanson, who now teaches at Harvard’s Kennedy School of Government “The stars aligned.”
Cultural issues also slowed the work. Academic superstars might have been faster to focus on the communities harmed by China if they lived there. Few did. “Places that were getting hit weren’t places that had universities,” says Hanson.
Most economists also defended free trade with the ardor of missionaries. “We developed the ethos that protectionism was the greatest evil, and we had to fight against it,” Hanson says. “We got lulled into complacency.” The trio took extra time to check their work, certain that their findings would be used to attack trade deals they still defend. All three think the world is better off with China in the WTO and that policy makers should have provided the spending necessary to help regions hurt by trade.
Their work rocketed to academic fame. “The China Syndrome” has been cited more than 2,500 times in other academic studies. Of the nearly 2,500 articles published between 2011 and 2015, only 15 were referenced more frequently. The three economists have become so prominent in their field, they are known simply as ADH.
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The pain caused by Chinese competition also wasn’t a priority for leaders of either political party. After President Clinton ushered China into the WTO, the two administrations that succeeded his—one Republican, one Democrat—continued his policy of engagement. Their goal was to further bend China to Western norms.
The WTO deal with China gave Washington a way to shut off Chinese imports when they overwhelmed industries. In conventional trade cases, industries must prove that imports cause economic “injury” before tariffs are slapped on imports. That’s a pretty tough standard to meet during economic expansions when an industry’s sales may grow despite Chinese competition. The WTO agreement gave U.S. industries an alternative, which lasted twelve years. Under the import-surge provision, industries simply had to prove that Chinese imports were disrupting markets and threatening industries, as they surely were, not that they were actually harming companies.
Charles Freeman, then an assistant U.S. trade representative for China, spread the word about the new provision, looking for import-surge cases, but he found little interest. When industries complained about Chinese imports, he asked whether they were interested in using the new provision. “Uniformly, they weren’t,” says Freeman.
Some officials speculated that trade lawyers didn’t want to file the cases because they weren’t as complicated as traditional antidumping suits, so there would be fewer billable hours. Trade lawyers certainly were busy. From 2001 to 2017, the United States imposed tariffs in 158 antidumping and subsidy cases.6 Others thought that industry didn’t believe President Bush would approve import-surge cases, the last step in the procedure.
Whatever the reason, the Bush administration considered only six cases. The industries involved were minuscule. One company complained that China was flooding the market with pedal actuators—a part in a brake pedal. That involved just seven jobs, Freeman recalls. Another complaint about Chinese imports of wire hangers affected about 150 workers.
The U.S. International Trade Commission, which had to make the preliminary ruling, turned down two of the cases; President Bush turned down the rest. Following Bush, President Obama approved one case involving tires, described in chapter 6.
Freeman says he was able to use the threat of bringing import-surge cases to get China to settle some disputes. But the disuse outrages former U.S. Trade Representative Barshefsky, who fought for import-surge provisions in negotiations with Chinese Premier Zhu Rongji. She and other WTO negotiators believe that if the United States had used the tool liberally, China would have gotten the message to go slowly in ramping up exports, giving communities more time to adjust. “As with any trade agreement, you’ve got to enforce,” she says. “You can’t pussyfoot around.”7
Top officials in the Bush and Obama administrations saw it differently, particularly Bush’s first U.S. trade representative, Robert Zoellick, and Obama’s chief economic adviser, Larry Summers. They worried about encouraging protectionism and figured U.S. industries had plenty of weapons to sue Beijing for unfair trade practices. Their bosses also wanted China’s help on many different issues. “The [Bush] administration decided that the national interest was not served by raising protectionist barriers,” says a senior Bush trade official.
President Bush sought China’s help in its antiterrorist campaigns after the 9/11 attacks and later pressed Beijing to boost spending to fight the global recession of 2008 and 2009. If China stimulated its economy, it would need more imports from hard-pressed nations, giving them a lift. China’s banks would also lend to companies facing hard times. President Obama continued to rely on China as an ally in the downturn. Later, he recruited Beijing to help craft the Paris global climate pact. China trade was secondary in both White Houses.
Both the Bush and Obama administrations wanted to restore a sense of trust and confidence in U.S. financial systems. That meant convincing China not to start selling its $1 trillion cache of U.S. Treasury bills and other government debt, which could panic others into selling, too. Bush Treasury Secretary Hank Paulson briefed Chinese leaders regularly about U.S. policy changes. “We’re watching this very carefully,” Chinese Vice Premier Wang Qishan warned Paulson. “We want to make sure you are going to protect our financial interests.”8
Paulson and Wang had been close since the 1990s, when Paulson was a rising star at Goldman Sachs and responsible for Asia. The two put together initial public offerings for Chinese banks and telecom companies and boasted of their friendship. But the financial crisis strained relations. “You were my teacher,” Wang told Paulson during a visit to the Treasury in 2008. “But now I am in my teacher’s domain, and look at your system, Hank. We aren’t sure we should be learning from you anymore.”9
Paulson set up annual meetings between U.S. and Chinese officials to hash out economic differences, which he called the Strategic Economic Dialogue (SED). Although China is an authoritarian state led by the general secretary of the Communist Party, Paulson understood that Beijing’s leaders often operate by consensus. A retinue of Chinese officials would meet their U.S. counterparts during SED sessions. Paulson knew he needed buy-in from a range of Chinese officials on the economic issues discussed.
In his book, Dealing with China, Paulson claims successes from the SED, including contracts for U.S. firms, pressure on China to let its currency rise somewhat, and launching negotiations for an investment treaty (never completed). In an interview, he says that the close coordination he arranged with Chinese leaders during SED meetings helped the United States convince Beijing not to sell U.S. securities and deepen the global downturn. “Our ability to communicate and coordinate with the top Chinese leaders 24/7 during the height of the panic was important in helping us avoid another Great Depression because China was a huge holder of corporate, banking, and Fannie Mae and Freddie Mac securities,” he says.
When Russians approached Chinese officials to suggest they both sell Fannie and Freddie securities, which would have worsened the crisis for the two U.S.-backed mortgage firms, Paulson says the Chinese informed him and said no to Moscow. “The Chinese refused, and we quickly found a creative way to nationalize the mortgage giants,” he adds.10
Others involved came to view the meetings as gabfests that produced long lists of pledges by both nations to change policies, but with no way to enforce anything.
Under President Obama, the talks were renamed the Strategic and Economic Dialogue and added security issues to economic ones. On the U.S. side, Treasury Secretary Timothy Geithner shared top billing with Secretary of State Hillary Clinton, but he found the proceedings so dull that he delegated most of the responsibility for the meetings to a deputy. For her part, Secretary Clinton wondered how best to handle China. “How do you deal toughly with your banker?” she asked Australian Prime Minister Kevin Rudd, who had long experience in China, in 2009, according to a State Department cable disclosed by WikiLeaks.
By the end of the Obama administration, White House attitudes toward China hardened somewhat. Worried that Beijing was trying to leap ahead of the United States in advanced computing, the administration in 2015 started blocking Chinese purchases of U.S. computer chip firms. That work was carried out by a secretive interagency group, called the Committee on Foreign Investment in the United States, which reviews foreign purchases to make sure they don’t endanger national security.
President Obama also played hardball after numerous reports that Beijing was hacking U.S. companies and handing their secrets to Chinese competitors. With Chinese President Xi Jinping due for a Washington visit in September 2015, the White House made clear that it would impose sanctions on Chinese companies, a move that might cause Xi to cancel his trip. Instead, Beijing dispatched a high-level delegation to Washington to discuss cyber spying.
On a cloudy fall day in Washington, the two presidents stood at adjoining podiums in the White House Rose Garden to announce they had reached a deal. Neither nation would use cyber technology to steal business information and give companies a competitive advantage. Obama aides say commercial spying subsided for a time, although their successors in the Trump administration say any improvement was short-lived.
Some of Obama’s top national security advisors say the administration should have pressed China harder on issues ranging from trade to China’s transforming some specks of land in the South China Sea into military outposts. “We had much more space to push on China,” says Ely Ratner, a China specialist in the Obama State Department. “In every instance where the Obama administration threatened negative consequences if China didn’t change its behavior, China changed its behavior. There was too much risk aversion.” He is now executive vice president of the Center for a New American Security, a Washington, D.C., think tank.
On the trade front, the Obama administration’s energies were focused on negotiating a twelve-nation pact with Pacific Rim countries, including Japan and Vietnam, called the Trans-Pacific Partnership. TPP members planned to cut tariffs and write rules governing Internet communications, intellectual property, and the behavior of state-owned enterprises—all areas of contention with China.
Over time, TPP could grow to include more countries in Asia and perhaps Europe. At some point, China would find it irresistible to join, which would require Beijing to make big changes in economic policy, as it did to join the WTO, Obama aides figured. If China chose not to join, it would be isolated. During a 2012 stop in Australia, an enthused Hillary Clinton said TPP “sets the gold standard in trade agreements to open free, transparent, and fair trade.”11
But by the time she ran for president in 2016, TPP was seen by American blue-collar voters as just another trade agreement that would help their bosses ship their jobs overseas. During the campaign, she said she opposed the deal. “My message to every worker in Michigan and across America is this: ‘I will stop any trade deal that kills jobs and holds down wages, including the Trans-Pacific Partnership,’” she said during a stop at Futuramic Tool & Engineering in Warren, Michigan. “I oppose it now. I’ll oppose it after the election. And I’ll oppose it as president.”
Some of her aides believe that if she had won, she would have tried to renegotiate the trade deal, not scrap it, as Donald Trump did on his first workday in the Oval office.
* * *
Back in Hickory and other factory towns, the pain from China didn’t let up by the time of the 2016 election. Manufacturing was slow to recover. The opioid crisis was worsening. Blue-collar voters were split between blaming China and other low-wage nations for their lost jobs or management for selling them out. They found an ally in Donald Trump, who they believed understood the forces threatening them.
“We can’t continue to allow China to rape our country, and that’s what they’re doing,” Trump told a rally in Fort Wayne, Indiana, in May 2016. “It’s the greatest theft in the history of the world.” 12He promised to bash China with 45 percent tariffs. (That is far more than even he put into effect once in office.) It worked. In Republican presidential primaries and the general election, he won 89 of the 100 counties most affected by competition from China. In the November voting, he carried those counties by seven percentage points more than the Republican presidential candidate did in 2012.
Alex Shuford IIⅠ, Century Furniture’s CEO, who says he is no fan of Trump, says he couldn’t miss Trump’s popularity among his workers. Around the time of the November election, he was touring Century factories, telling workers that he thought the company was having a tough year because consumers were keeping their wallets closed until after the election. When he gave the talk a few days before the election, there was no reaction, even among the many in the crowd wearing Trump T-shirts. When he gave the same talk a few days after the election, the workplaces broke into raucous cheers: “Trump! Trump! Trump!”
“Parts of America wanted a bully,” says Shuford. “People felt, ‘We keep getting picked on and pushed around. I want the guy who punches back. I want the guy who punches first.’”
In a tight election decided by some tens of thousands of votes in a handful of states, there are any number of explanations for Trump’s victory. Russian bots. FBI director James Comey’s harping on Clinton emails. Clinton’s neglect of midwestern voters.
Economists Autor, Dorn, and Hanson have a different explanation.
For every one percentage point increase in Chinese imports in local markets between 2002 and 2014, they calculate, Trump’s countywide vote increased by 2 percentage points, compared with the share of the vote won by George W. Bush in 2000. In places where Chinese imports didn’t play much of a role, including big swathes of the Great Plains, the political impact from China was negligible. But in areas where Chinese imports walloped local industries, as in the swing states of North Carolina, Pennsylvania, New Hampshire, Wisconsin, and Michigan, the China impact was substantial.
Trump carried North Carolina by 3.8 percent and other swing states by narrower margins. If Chinese import growth had been 50 percent slower than it was—a rate that still would have made China’s import surge one of the fastest in U.S. history—the economists figure Clinton would have nearly carried North Carolina and would have won Pennsylvania, Wisconsin, and Michigan. That would have been enough 13to defeat Donald Trump.