Does China trade shock hurt US employments? A novel approach and empirical evidence incorporating functional heterogeneity

US-China trade simultaneously generates job gains and losses in the US, making the net employment effect uncertain. This paper explores the impact of China trade shock on US labor market outcomes across business functions. We first adjust employment measures for productivity differences to ensure cross-country comparability and consistency. Based on this adjustment, we assess the net employment effect for the US by comparing the positive effect of US export expansion with the negative effect of import competition from China. We then examine whether the rise in decoupling would offset the negative employment effects of China trade shock on the US, by evaluating the potential impact of a partial decoupling from China. Importantly, employment is disaggregated by business function, including R&D, marketing, management, and fabrication. Our empirical results indicate net job losses for the US, the bulk of which arise from fabrication activities. However, the US experiences net job gains in knowledge-intensive R&D and management functions that can be attributed to China. Scenario analysis shows that partial decoupling of the US from China would only alleviate symptoms rather than fully resolve the problems, particularly for fabrication employment.