Planet Money Why economists got free trade with China so wrong
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Dec 30, 2025 
David Autor, an MIT economics professor renowned for his research on trade's labor market impacts, joins to discuss the fallout from U.S.-China trade relations. He reveals how concentrated job losses in manufacturing have affected specific regions and the painful adaptation process for displaced workers. Autor critiques earlier economic models for overlooking local employment effects and emphasizes the complications of worker mobility and reskilling. He also addresses the implications of tariffs and advocates for strategic investment to rejuvenate industries and maintain economic leadership.
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Free Trade's Uneven Local Costs
- Free trade increased U.S. GDP but created concentrated local losses that mainstream models missed.
- David Autor shows the China shock destroyed well‑paid manufacturing jobs in specific communities, causing long-term harm.
Why Some Places Were Hit Like Bombs
- Manufacturing is highly localized and specialized, so import competition hits certain places hard.
- When China surged after 2001, many labor-intensive U.S. sectors became non-competitive almost overnight.
Why Economists Missed The Shock
- Classical trade theory predicts aggregate gains and some losers but often assumes full employment and wage adjustment.
- Autor argues prior methods missed employment effects because they focused on prices and wages, not regional job losses.