Trade conflict backfiring on US workers as overseas investors start to look elsewhere

The founder of Chinese e-commerce giant Alibaba, Jack Ma Yun, has abandoned a promise to create 1 million jobs in the US. His move is just the beginning of bigger-than-estimated job losses in the US triggered by the ongoing trade tensions between China and the US.

In a recent interview with the Xinhua News Agency, Ma said his initial commitment to create employment in the US was made on the premise of a friendly China-US partnership. That premise no longer exists, so “our promise cannot be fulfilled,” Ma said.

The warning came several hours after the US suddenly escalated the trade dispute by announcing it would impose a 10 percent tariff on September 24 on $200 billion worth of Chinese goods.

The US economy added 213,000 jobs in June as the unemployment rate remained at a low level, but the escalating trade conflict may dim the long-term picture for US employment. Ma’s comments reminded US economists that they may have underestimated the negative effect of the ChinaUS trade conflict on the American job market.

During the past four decades, China has gone from being a low-wage supplier to a center of many global value chains. As the trade conflict intensifies, retaliatory tariffs imposed by China have made some US exports less competitive in the Chinese market, thus weakening the US’ position in the global value chain. The matter may have a long-lasting negative impact on US exports and export-oriented jobs.

Further, China is witnessing a boom in outbound investment, but much of that money may go to other markets than the US, instead of being used to stimulate US jobs. Ma’s comments have drawn lots of attention amid the escalating trade conflict, but Alibaba will not be the only Chinese enterprise to lose interest in US investment. Such decisions will have a direct influence on the US job market in the foreseeable future.

The trade conflict has already made the US lose the chance of adding 1 million jobs but it seems that’s only the beginning.

It’s possible that the trade dispute will become an ongoing conflict with a long-term negative impact on the US economy.