The Surprisingly Swift Decline of US Manufacturing Employment

This paper nds a link between the sharp drop in U.S. manufacturing employment after 2001 and the elimination of trade policy uncertainty resulting from the U.S. granting of permanent normal trade relations to China in late 2000. We nd that industries where the threat of tari hikes declines the most experience greater employment loss due to suppressed job creation, exaggerated job destruction and a substitution away from low-skill workers. We show that these policy-related employment losses coincide with a relative acceleration of U.S. imports from China, the number of U.S. rms importing from China, the number of Chinese rms exporting to the U.S., and the number of U.S.-China importer-exporter pairs. ∗Schott thanks the National Science Foundation (SES-0241474 and SES-0550190) for research support. We thank Teresa Fort, Kyle Handley and seminar participants at Duke, the Federal Reserve Bank of Minneapolis, Hitotsubashi, and UCSD for helpful comments. Any opinions and conclusions expressed herein are those of the authors and do not necessarily represent the views of the U.S. Census Bureau, the Board of Governors or its research sta . All results have been reviewed to ensure that no con dential information is disclosed. †20th & C Streets NW, Washington, DC 20551, tel: (202) 452-2980, email: [email protected]. ‡135 Prospect Street, New Haven, CT 06520, tel: (203) 436-4260, email: [email protected].