Aug 30, 2018

An Even Bigger China Shock

Scott Sumner Ralph G. Hawtrey Chair of Monetary Policy

By now many of us are familiar with the basic arguments for and against President Trump’s trade war with China. Over the past few decades, U.S. imports from China have surged. Several academic studies referred to this as a “China shock,” which adversely impacted a number of American regions that focus on manufacturing. At the same time, most economists believe that international trade benefits the United States as a whole. More recently, the Trump administration has made a big issue about our trade deficit.

While all of these events might seem related, on closer inspection there are a number of puzzles that have been widely overlooked...

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Photo credit: Cliff Owen/AP/Shutterstock

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