{"id":787463,"date":"2026-05-10T22:40:38","date_gmt":"2026-05-10T22:40:38","guid":{"rendered":"https:\/\/www.europesays.com\/us\/787463\/"},"modified":"2026-05-10T22:40:38","modified_gmt":"2026-05-10T22:40:38","slug":"ai-shock-is-looking-a-lot-like-the-china-shock-and-thats-actually-good-news-top-economist-says","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/us\/787463\/","title":{"rendered":"AI shock is looking a lot like the China shock, and that\u2019s actually good news, top economist says"},"content":{"rendered":"

In 2001, China joined the World Trade Organization, sparking a manufacturing surge for the country. China became the \u201cworld\u2019s factory,\u201d and its export rate grew 30% each year<\/a> from 2001 to 2006, more than double the growth rate from the previous five years.<\/p>\n

While the U.S. reaped the benefits of cheap imports from its new normalized trade partner, the American manufacturing sector took a beating: China\u2019s production explosion accounted for 59.3% of all U.S. manufacturing job losses<\/a> between 2001 until 2019\u2014about 4 million jobs. Economists David Autor, David Dorn, and Gordon Hanson coined this phenomenon the \u201cChina shock<\/a>.\u201d<\/p>\n

A quarter of a century later, some economists have compared this industrial transformation and today\u2019s rise of AI. Like the China shock, AI growth has been associated with a shift in labor: Despite many economists seeing little <\/a>evidence, so far, of mass job displacement as a result of AI, tech companies have used the technology to justify laying off thousands of workers. Last month, Snap<\/a> CEO Evan Spiegel announced the reduction of about 1,000 roles<\/a> at the company, 16% of its staff. Klarna CEO Sebastian Siemiatkowski anticipates AI shrinking the company\u2019s white-collar workforce by one-third<\/a> by 2030.<\/p>\n

\u201cThe AI shock is following the same playbook,\u201d Apollo chief economist Torsten Slok said in a blog post<\/a> this past week. \u201cThe displacement force is different this time, impacting cognitive and white-collar work rather than factory floors. But every other element of the structure is remarkably familiar.\u201d<\/p>\n

China shock vs. AI shock<\/strong><\/p>\n

According to Slok, the shared themes of labor market upheaval between the AI and the China shocks may not be a bad thing. Following China\u2019s WTO entry, overall U.S. unemployment remained low. As for manufacturing, the sector\u2019s share of the labor market<\/a> was already in decline well before the China shock as the U.S. transitioned to a service-oriented economy. <\/p>\n

Meanwhile, cheaper intermediary goods from China helped boost manufacturing productivity, resulting in a 50% increase<\/a> in real manufacturing value added from 2001 to 2024.<\/p>\n

Slok sees similar trends in productivity and labor in the AI future.<\/p>\n

\u201cIf history is any guide, the gains will be substantial,\u201d he said. \u201cJust as cheaper Chinese inputs helped U.S. businesses grow and hire, AI is already accelerating business formation and productivity gains across the economy.\u201d<\/p>\n

Slok has previously invoked Jevons paradox<\/a> to explain why AI will actually create more jobs overall, despite some employers attributing layoffs to the technology. In 1965, economist Willian Stanley Jevons observed that following the invention of the Watt steam engine that improved the efficiency of the coal fired engine, coal consumption actually increased significantly as coal-powered energy became cheaper, incentivizing greater coal use.<\/p>\n

Similarly, Slok argued in a blog post<\/a> last month, as AI makes some white-collar work more efficient, the market for those positions expands, creating more jobs. This paradox can be seen in real time in radiology<\/a>: AI has been able to automate<\/a> parts of the imaging process, but the number of active radiologists in the U.S. over the past decade has grown by about 10%.<\/p>\n

In in latest post, Slok said AI has the potential to shift concentrations of jobs in different areas or create new jobs altogether, similar to how the rise of Chinese manufacturing cemented the U.S.\u2019s service economy while growing its productivity in manufacturing.<\/p>\n

\u201cThe bottom line is that we have seen this before,\u201d he concluded. \u201cJust as the China shock gave way to new industries and stronger businesses, AI will drive productivity gains and create opportunities that will more than replace jobs lost today.\u201d<\/p>\n

The case against a China shock redux<\/strong><\/p>\n

Autor, the economist who helped coin the term \u201cChina shock,\u201d isn\u2019t as convinced of the parallels. In an episode of the Possible podcast<\/a> hosted by LinkedIn<\/a> co-founder Reid Hoffman, he said AI \u201cwill not be, in any sense, a repeat of the China trade shock.\u201d<\/p>\n

Unlike Slok, Autor argued AI will displace jobs, and will do so differently than the China shock did. He suggested AI will target job functions, not specific industries or regional geographies, increasing the likelihood of AI creating even greater labor changes\u2014though not wiping out any one profession.<\/p>\n

How these labor changes are perceived will also be different than the early 2000s, Autor said.\u00a0<\/p>\n

\u201cThe China trade shock was experienced by U.S. firms as a pure negative competitive shock,\u201d he said. \u201cAll of a sudden, they couldn\u2019t charge the prices they were charging. Someone else was charging much less. And so from a firm perspective, this was all bad.\u201d<\/p>\n

AI, however, has the potential to drive up productivity and lower prices, Autor argued, making it appealing from a business perspective, but potentially more disruptive to labor.<\/p>\n

\u201cAI will be experienced by many firms as productivity increases, so it may still lead to displacement of workers,\u201d Autor said. \u201cIn fact it will, I don\u2019t want to suggest it will not. But it will have a very different texture.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"In 2001, China joined the World Trade Organization, sparking a manufacturing surge for the country. China became the…\n","protected":false},"author":3,"featured_media":787464,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12],"tags":[2298,64,79,420,606,10841,67,132,68],"class_list":{"0":"post-787463","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-automation","9":"tag-business","10":"tag-economy","11":"tag-jobs","12":"tag-labor","13":"tag-productivity","14":"tag-united-states","15":"tag-unitedstates","16":"tag-us"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@us\/116552691066967310","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/787463","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/comments?post=787463"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/787463\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media\/787464"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media?parent=787463"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/categories?post=787463"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/tags?post=787463"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}