JUST RELEASED: Why China Shock 2.0 Could Be American Manufacturing’s Last Stand

Tags Trade with China

Report Comes as Treasury Secretary Janet Yellen Warns of Chinese Overcapacity’s Threat to U.S. Industries

Washington, D.C. — Chinese industrial overcapacity threatens to suffocate America’s manufacturing base unless the federal government acts now, according to a new report released by the Alliance for American Manufacturing (AAM) on Friday. 

“Overcapacity is a feature, not a bug, of China’s model of state capitalism,” the report states. Beijing is leveraging this strategy while exploiting U.S. industrial policy to create a potential China Shock 2.0 that could “again close tens of thousands of U.S. factories and lay off millions of U.S. manufacturing workers,” according to the report. 

Despite a recent “tectonic shift in U.S. trade policy” that has yielded steep tariffs on Chinese imports, “it still may not be enough,” the report urges. America has seen the consequences of doing too little too late, as the report’s examination of historic and contemporary case studies in the U.S. solar, steel, auto, tire, paper and glass industries reveal.

Meanwhile, an overwhelming majority of Americans (80%) want the federal government to “crack down” on unfair trade practices, according to new polling conducted by Morning Consult for the report.

“If U.S. policymakers sit idly by, this shock could be American manufacturing’s last stand,” the report states. And hard-working Americans will pay the price, profiles of workers harmed by Chinese overcapacity document in the report.  

Treasury Secretary Janet Yellen warned on Thursday that Chinese overcapacity endangers industries critical to the United States’ long-term growth. 

More Key Poll Findings:

  • A vast majority of Americans (75%) agree that the federal government should be able to prohibit U.S. corporations from investing in manufacturing in other countries if it poses a threat to U.S. national and economic security.
  • The majority (63%) agree that China is beating the United States in manufacturing. 
  • Large majorities agree that it is important for the U.S. to be able to domestically manufacture goods in a wide swath of industries: energy (87%), autos (81%), and steel (77%).
  • Nearly seven-in-10 Americans (68%) want the next U.S. president to strengthen or sustain tariffs on steel and aluminum and Chinese products. 

Policy recommendations include:

  • Imposing exclusionary tariffs on all Chinese automobile imports to the U.S.; enacting the Leveling the Playing Field Act 2.0; reinstating Section 421; and improving the Steel Import Monitoring and Analysis System
  • Fully enforcing and tightening the United States-Mexico-Canada Agreement rules of origin for all automobile content in the 2026 joint review  
  • Comprehensively implementing and enforcing the Uyghur Forced Labor Prevention Act with additional emphasis on metals, automotive parts, and battery content and raw materials utilized in EVs
  • Strictly enforcing the Clean Vehicle Tax Credits authorized under the Inflation Reduction Act and other domestic content preferences for automobile content and related transit

Alliance for American Manufacturing President Scott Paul is available for interview. 

Read AAM’s full report here