Starting in the 1990s, Europe and the U.S. outsourced manufacturing to China for a variety of reasons (mostly because it was cheaper). MIT economist David Autor coined the term “China Shock” to describe this trend, which took place suddenly over seven years. While stuff got cheaper, and American companies’ margins got bigger, this disruption also cost millions of people their livelihood.

One of the long term effects is that the U.S. is not as capable of producing its own stuff as it used to be—including valuable technology like GPUs. 

In a recent interview, he pointed out how the current administration’s drastic actions won’t help reverse China Shock, or stop a second China Shock from happening. David says, “Letting free trade rip is an easy policy. Putting up giant tariffs is an easy policy. Figuring out some middle path is hard. Deciding what sectors to invest in and protect is hard. Doing the work to build new industries is hard. But this is how great nations lead.”

To David, the middle path answer looks something like this:

• Focus manufacturing on innovation sectors such as drones, semiconductors, electric vehicles, solar cells, etc. This focus is key, as we need to consider the U.S. has 13 million manufacturing workers, compared to China’s 120 million.
• Increase funding through programs similar to the Inflation Reduction Act (billions of dollars in grant and loan programs and other investments for clean energy and climate action (including electric vehicles)) and the CHIPS and Science Act ($280 billion of new funding for activities incentivizing the production of semiconductors in the U.S.).
• Introduced targeted tariffs on electric vehicles, solar cells, and semiconductors from China—not the general, blanket, tariffs that are being enacted.
• Make sure the government commits to public purchasing from U.S. manufacturers for electric vehicles, solar cells, and semiconductors.
• Increase investments in universities.
• Bring in skilled talent from overseas, including expanding the H-1B program. 
• Enlist the support of allies in manufacturing innovation sectors.

The takeaway is this: instituting a blanket policy is easy. Free trade is easy, and protectionism is easy. One easy system-level decision, and it’s done.

While the middle path that David is suggesting sounds much more difficult—with much more nuance, patience, decisions, relationships, and investment—it also has a better shot at being more effective than the current actions.

It’s made me reconsider how I approach my own career as well: no longer biasing towards a blanket policy just because it’s quick and easy, and instead with more nuance and more specific, focused, decisions (e.g., focusing on higher value areas, getting friends and peers involved, intentionally setting aside time and money aside for specific projects).