1. A General Assessment of “We Warned About the First China Shock. The Next One Will Be Worse”
The July 14, 2025 New York Times article, “We Warned About the First China Shock. The Next One Will Be Worse,” by David Autor and Gordon Hanson, presents a forceful intervention in the debate over U.S.–China economic relations. Drawing on their longstanding research on trade shocks and labor-market disruption, the authors argue that the United States is poorly prepared for a second, potentially more damaging wave of competition from China. Their central objective is not merely to warn, but to outline a framework for a more effective and forward-looking American response.
At the core of the article are four proposed principles. The first, coordinated competition with allies, calls for aligning U.S. trade and industrial policy with partners such as the European Union, Japan, and Canada, rather than alienating them through unilateral tariffs. The authors argue that multilateral action would be more effective in shaping China’s behavior and that, paradoxically, selective openness to Chinese manufacturing within the United States could strengthen domestic firms through competition, provided genuine national security risks are addressed.
The second principle, aggressive public investment in future industries, urges the U.S. to embrace a high-risk, experimental approach to innovation. Autor and Hanson advocate for large-scale government-backed investment in strategically vital sectors—such as advanced semiconductors, biotechnology, quantum computing, and clean energy—accepting that many efforts will fail. They frame this as a historically proven model, citing wartime research, the space race, and Operation Warp Speed as evidence that state-led risk-taking can catalyze transformative industries.
The third principle, strategic focus combined with policy continuity, emphasizes choosing battles that are either winnable or existential—such as semiconductors and rare earths—and sustaining investment over the long term. The authors sharply criticize the volatility of the U.S. political system, arguing that frequent reversals in industrial policy undermine credibility and effectiveness. Even flawed initiatives, they suggest, are preferable to abruptly dismantling programs before they mature.
The fourth principle, robust protection for workers facing economic shocks, addresses the social costs of trade and technological change. Autor and Hanson highlight the lasting damage caused by manufacturing job losses and argue for expanding tools such as unemployment insurance, wage insurance, and targeted retraining through community colleges. They contend that tariffs are ill-suited to protecting workers and that direct support for displaced labor and new business formation is both more humane and more economically effective.
Despite the clarity and internal coherence of this framework, the article remains open to critique. Its analysis leans heavily on broad economic concepts—technology, capital, innovation ecosystems, and trade coordination—while giving insufficient attention to deeper structural constraints within the United States. The authors assume a level of political capacity, institutional discipline, and social consensus that the U.S. system has repeatedly struggled to sustain. Moreover, their call to emulate aspects of China’s industrial strategy underestimates the cultural, historical, and institutional differences that make direct transplantation of that model highly problematic.
In sum, “We Warned About the First China Shock. The Next One Will Be Worse” offers a compelling strategic vision grounded in serious economic scholarship, but its prescriptions risk oversimplifying the gap between theory and practice. The article is strongest as a diagnosis of what the United States should aspire to do, and weakest in confronting whether the American political and social system is capable of executing such an ambitious and disciplined agenda.
2. Critiques of Specific Recommendations in the Article
2.1 Assessing the Proposal to Attract Chinese Investment into U.S. Manufacturing
The article advances the idea that encouraging Chinese electric vehicle and battery manufacturers to establish production facilities in the United States could stimulate domestic innovation through competitive pressure, often described as a “catfish effect.” In theory, this approach aims to revitalize U.S. manufacturing by exposing domestic firms to advanced foreign competitors and accelerating technological diffusion. However, the proposal underestimates the profound political, institutional, and strategic barriers that shape U.S.–China economic relations.
Foremost among these barriers are national security concerns, exemplified by restrictions on Huawei, semiconductor exports, and other technology-intensive sectors. These policies fundamentally contradict the notion of welcoming Chinese firms into strategically sensitive areas of U.S. manufacturing. In addition, the U.S. business environment—characterized by volatile trade policy, tariffs, regulatory uncertainty, and recurring geopolitical tensions—offers little assurance to long-term foreign investors. Unlike China’s earlier success in attracting foreign capital through strong centralized governance, policy consistency, and targeted incentives, the United States currently lacks the political stability and institutional coherence required to implement such a strategy effectively. Without substantial systemic reform, the proposal remains largely aspirational rather than operational.
2.2 Evaluating Proposals for Large-Scale Public Investment in Strategic Sectors
The article calls for aggressive public investment in a set of strategically important industries, including drones, advanced semiconductors, fusion energy, quantum technology, and biotechnology. Central to this proposal is the adoption of a government-led venture funding model modeled loosely on China’s experimentation-driven industrial policy. In principle, such an approach aims to accelerate innovation, reduce technological dependence, and secure long-term economic and national security advantages.
In practice, however, the proposal underestimates the depth of political and structural constraints in the United States. Persistent partisan fragmentation makes sustained, long-term investment strategies difficult to maintain, as major initiatives are frequently reversed or weakened when political control shifts. Historical analogies to World War II research mobilization, the Apollo program, or Operation Warp Speed are therefore of limited relevance, as they emerged under conditions of exceptional consensus and centralized authority that are largely absent today. Furthermore, the U.S. innovation system remains heavily dependent on private finance, with no unified, government-led framework capable of coordinating risk-taking, capital allocation, and long-term technological direction. These structural realities significantly limit the feasibility of implementing a “China-style” investment strategy in the current U.S. context.
2.3 Assessing the Viability of Selective Industrial Prioritization
The article advocates for a strategy of selectively prioritizing industries in which the United States either retains a competitive advantage, such as advanced semiconductors, or faces unacceptable strategic vulnerability, such as rare earths. This approach seeks to concentrate limited public resources on sectors deemed essential to economic resilience and national security, thereby avoiding the inefficiencies of overly broad industrial policy.
Yet this strategy underestimates the constraints imposed by short-term political cycles and weak policy continuity in the United States. Effective industrial targeting requires sustained commitment over decades, whereas U.S. electoral dynamics incentivize short-term gains and frequent policy reversals. Compounding this challenge is a structural misalignment between national industrial ambitions and the composition of U.S. elites, whose expertise and influence are disproportionately concentrated in finance rather than manufacturing or technological production. Finally, the strategy overlooks the fact that advanced manufacturing depends on extensive networks of mid- and low-end supporting industries, many of which have migrated to China. Without rebuilding this underlying industrial infrastructure, efforts to dominate or secure isolated high-end sectors are unlikely to succeed.
2.4 Evaluating Policy Approaches to Addressing Manufacturing Job Displacement
The article proposes mitigating manufacturing job losses through a combination of unemployment insurance, wage insurance, and expanded career and technical education. These measures are intended to ease worker transitions, reduce income volatility, and help displaced employees adapt to structural changes in the labor market. In principle, such policies acknowledge the social costs of industrial restructuring and the need for a safety net to accompany economic adjustment.
In practice, however, these interventions suffer from limitations of scale and scope. Existing programs, such as Trade Adjustment Assistance, remain chronically underfunded, inconsistently administered, and poorly aligned with the needs of affected workers. More fundamentally, the analysis understates the role of structural class conflict and extreme wealth inequality in shaping labor market outcomes. Worker precarity in the United States is driven not only by foreign competition, but also by domestic institutional arrangements that favor capital over labor. While transitional support programs may offer some long-term benefits, they do little to address immediate pressures such as personal debt burdens and sudden unemployment, nor do they confront the deeper distributional dynamics that perpetuate worker vulnerability.
3. Broader Structural Critiques
3.1 Structural Constraints of the U.S. Political System
A central limitation highlighted in the critique is the inability of the U.S. political system to sustain long-term, coherent policy strategies. The two-party system, dominated by intense partisan competition, incentivizes short-term positioning over durable national planning. As a result, industrial, technological, and climate-related initiatives are often framed as partisan achievements rather than as elements of a shared, long-term national strategy.
This structural instability is evident in the repeated reversal or dilution of major policy agendas as political power alternates between administrations, such as during the transitions from Obama to Trump and beyond. Initiatives aimed at semiconductor revitalization or clean-energy investment have suffered from inconsistent support, shifting priorities, and political sabotage. Compounding the problem, political actors frequently prioritize personal advancement or party advantage over sustained industrial coordination. Under these conditions, even policies that are theoretically sound face a high risk of failure, suggesting that meaningful economic strategy would require far-reaching political reform rather than incremental policy adjustments.
3.2 Structural Weaknesses in the U.S. Economic and Social Model
The critique situates U.S. industrial decline within a broader set of economic and social structural weaknesses. Extreme wealth inequality concentrates capital and decision-making power in the hands of a narrow elite, enabling the extraction of labor value without corresponding reinvestment in productive capacity. This dynamic undermines long-term industrial competitiveness by prioritizing short-term financial returns over sustained technological development and workforce investment.
These distortions are reinforced by an overemphasis on finance and service sectors, which attract a disproportionate share of the nation’s talent and resources at the expense of manufacturing and industrial innovation. At the same time, systemic inefficiencies in healthcare and insurance impose heavy financial burdens on households, diverting income away from education, mobility, and productive investment. Compounding these challenges are persistent gaps in basic education and technical training, leaving large segments of the workforce ill-prepared for modern manufacturing or advanced innovation. Together, these structural deficiencies limit the United States’ capacity to translate policy ambitions into durable economic renewal.
3.3 Civilizational and Cultural Constraints on Industrial Strategy
The critique emphasizes that differences in economic outcomes cannot be understood solely through policy design, but must also be situated within broader cultural and civilizational contexts. China is portrayed as possessing systemic advantages rooted in centralized planning, long-term strategic orientation, societal discipline, and the ability to concentrate resources toward national priorities. These characteristics enable sustained industrial and technological initiatives that unfold over decades rather than electoral cycles.
By contrast, Western political culture—particularly in the United States—is marked by deep partisan divisions, fragmented authority, and persistent ideological and identity-based conflicts. These features erode social cohesion and weaken the capacity to mobilize consensus around large-scale industrial or technological transformation. As a result, even well-conceived policy frameworks face significant obstacles in implementation, suggesting that cultural and institutional foundations play a decisive role in shaping the limits of economic strategy.
4. Critiques of the Article’s Historical and Analytical Assumptions
4.1 Reassessing the Historical Path of Global Industrial Transfer
The critique challenges the article’s oversimplified portrayal of China’s industrial rise by situating it within a longer and more complex history of global industrial transfer. Rather than emerging directly from U.S. technology or capital relocation, China’s early industrialization followed a multi-stage regional progression. Industrial capacity first shifted from the United States to Japan, then to newly industrialized economies such as South Korea, Taiwan, Singapore, and Hong Kong, before moving through Southeast Asian economies including Malaysia, Thailand, the Philippines, and Indonesia.
Only after this extended process did large-scale industrial activity consolidate in mainland China, where it was further shaped by domestic institutional reforms, labor mobilization, and state coordination. This historical sequencing suggests that China’s development was not a simple byproduct of bilateral U.S.–China engagement, but the outcome of decades of cumulative regional integration and capability building. By neglecting this broader trajectory, the article risks misattributing both the causes of China’s rise and the lessons that can reasonably be drawn for contemporary industrial policy.
4.2 Underappreciated Structural Strengths in China’s Competitive Position
The critique argues that the article underestimates the depth of China’s systemic advantages in assessing future economic competition. China’s strategic patience, vast population scale, and ability to concentrate talent and resources within an integrated industrial system provide structural strengths that are difficult for the United States to replicate. These factors enable sustained execution across long time horizons, allowing policy objectives to be translated into tangible industrial outcomes with relative efficiency.
Western analyses, by contrast, often focus on headline indicators such as innovation spending or firm-level competitiveness while overlooking China’s capacity for coordinated action and national cohesion. By failing to account for execution capability and the alignment between state priorities and industrial actors, such comparisons risk overstating U.S. adaptability and understating the resilience of China’s economic model. This analytical gap leads to an incomplete understanding of the competitive balance between the two systems.
4.3 Limits of Technology-Centered Assessments of National Power
The critique contends that the article places excessive emphasis on technology while neglecting the broader economic, social, and institutional conditions required for technological advances to translate into durable national strength. Technological breakthroughs, in isolation, do not guarantee sustained economic growth or geopolitical dominance; their impact depends on complementary systems such as industrial capacity, capital allocation, workforce readiness, and governance structures.
Moreover, competitive advantages derived from technology tend to erode over time through diffusion, commodification, and decommissioning, reducing their long-term strategic value. Even in China, where rapid progress in areas such as artificial intelligence is evident, challenges remain in monetization, large-scale deployment, and practical integration into productivity gains. By overlooking these constraints, the article risks overstating the decisive role of technology itself while underestimating the systemic factors that ultimately determine national competitiveness.
5. Constraints on the Practical Feasibility of Proposed Industrial Policies
The critique highlights fundamental obstacles that undermine the practical feasibility of the policy proposals advanced in the article. Chief among these is persistent political fragmentation, in which partisan conflict prevents the formulation and maintenance of coherent, long-term industrial strategies. In such an environment, policy initiatives are vulnerable to reversal, dilution, or symbolic implementation, limiting their capacity to generate sustained structural change.
Beyond politics, the critique underscores deep industrial dependencies that constrain policy execution. High-end U.S. manufacturing sectors rely on extensive networks of mid- and low-end production, many of which have been offshored over decades and are now embedded abroad. Attempts to attract Chinese manufacturing investment without comprehensive structural reform therefore appear unrealistic, particularly given geopolitical tensions and regulatory uncertainty. Finally, the analysis argues that neither MAGA-style nationalism nor conventional Democratic industrial policy frameworks are sufficient on their own to deliver the systemic transformation required. Without a unifying, cross-partisan approach and deep institutional reform, ambitious industrial strategies are unlikely to move beyond rhetoric.
6. Toward a More Contextually Grounded Policy Analysis
The critique calls for a more context-sensitive framework when comparing the economic trajectories and policy capacities of China and the United States. Meaningful comparison, it argues, requires careful attention to historical legacies, political institutions, cultural norms, and demographic realities rather than abstract benchmarking of outcomes or capabilities. Without acknowledging these structural differences, policy prescriptions risk becoming superficial analogies rather than actionable strategies.
Accordingly, the analysis urges a shift away from broad or symbolic recommendations—such as simply inviting Chinese firms to invest in the United States—toward reforms that directly address domestic constraints. These include persistent wealth inequality, weakened industrial and educational infrastructure, chronic policy discontinuity, and inefficiencies embedded in the healthcare and insurance systems. Recognizing these systemic limits is essential, as U.S. competitiveness in advanced industries is further constrained by finance-dominated talent allocation, fragmented governance, and short-term policy horizons. Only by grounding analysis in these realities can policy debates move from aspirational rhetoric to credible and effective reform pathways.
7. Summary & Implications
In conclusion, while the New York Times article offers a useful starting point for discussing U.S.–China economic competition and its implications for labor markets, its policy recommendations remain largely theoretical and detached from structural realities. The analysis relies heavily on Western assumptions about political cohesion and policy capacity, while underestimating China’s systemic advantages in coordination, execution, and long-term strategy. As a result, proposed remedies appear aspirational rather than operational.
More fundamentally, the article does not adequately confront the United States’ internal constraints, including extreme wealth inequality, chronic policy instability, finance-dominated talent allocation, and the erosion of industrial and educational foundations. It also overlooks the historical complexity of global industrial transfer and technological development, simplifying the origins of China’s rise. A credible U.S. response would therefore require deep domestic reform, sustained alignment between industrial policy and human capital, and a sober recognition of China’s structural strengths rather than reliance on abstract or idealized policy models.
References
- “We Warned About the First China Shock. The Next One Will Be Worse.”. DAVID AUTOR, GORDON HANSON. the New York Times. 14 Jul 2025. https://www.nytimes.com/2025/07/14/opinion/china-shock-economy-manufacturing.html