For years, U.S. economic policy has been greatly shaped by the idea of the “China Shock.” The term, coined by three economists in a 2016 paper, captures the widespread belief that trade with China resulted in the deindustrialization of significant parts of the United States and the loss of huge numbers of manufacturing jobs.
It has fueled much of President Donald Trump’s trade policy and President Biden’s new industrial policy, both premised on the notion that China presents a serious challenge to the United States’ economic position in the world. It is increasingly clear that that challenge has been overcome.
The other disruption to the American system — the Trump shock — has not. It threatens to destroy any and all American institutions that stand the way of America’s populist demagogue.