Walmartification of America: What decoupling means for the heartland

Will Super Bowl parties be the same without a 10-foot screen on the wall? Trump's global tariff war is already setting the stock market ablaze, and it will kill the vibe, too. It aims to reverse the gains made by working-class Americans after China and the US normalized ties.

The News

• China retaliated against the US "retaliatory" tariffs with a matching 34% levy against American imports.
• The move includes countermeasures targeting American tech companies, sinking Nasdaq-listed stocks such as Apple, Tesla, and Nvidia.
• It's in response to Trump's "Liberation Day" tariffs, including 54% on Chinese goods on top of the ones already in place.

The Context

US President Donald Trump's tariffs are for numerous reasons:

1. To turn the US back into a manufacturing base, undoing American job offshoring
2. To rebalance trade, particularly with China
3. To (somehow) stop the flow of fentanyl into the US
4. To punish the wildlife living on uninhabited islands

Number 4 was absent from the White House fact sheet, but it's up for speculation.

Yanis Varoufakis argues the measures are made to force central banks to sell dollar reserves:

Their utility comes from their capacity to shock foreign central bankers into reducing domestic interest rates. Consequently, the euro, the yen and the renminbi will soften relative to the dollar. This will cancel out the price hikes of goods imported into the US, and leave the prices American consumers pay unaffected. The tariffed countries will be in effect paying for Trump’s tariffs.

Trump has also long favored decoupling from China. During the 2020 campaign, he said it was an "option" on the table. The main concern about onshoring jobs stems from an underexplored phenomenon, the China Shock. To understand that, let's walk down memory lane to the American heartland.

The Walmartification of America

When I was in middle school, my family moved to a small town in Nevada. The news devastated my sister, a consummate city-lover. I was indifferent, though I had my own idea of what countryside life was like: Walmart.

This stereotype came true for Elko in the mid-2000s. Other big-box competitors, such as JCPenney, Sears, and K-Mart, closed their locations. It was the mining town's mall. I can't tell you how often a friend would say, "Hey, do you want to hang out at Walmart?" Fun time.

The company is the largest employer in America outside of the Department of Defense. While its presence in suburban America is prominent, towns like Elko exist nationwide. They serve as pharmacies and delis, hardware and grocery stores, tire shops, and more. Anything you need, they probably have it. And yes, to my non-American readers, that includes guns.

Walmart's success was intrinsically tied to China and the US resuming trade in the 1980s. When someone mentions the China Shock, this is what it means. The phenomenon didn't come full swing until the 2000s when American companies like Wally's World ramped up operations in China.

What little research we have about the China Shock paints a confusing picture. A study found America lost as many as 2 million jobs between 1997 and 2011. The authors revisited the study, finding only 6.3% of US localities faced net losses because of offshore competitors. This was after examining trade benefits, such as lower consumer prices. (Source)

In other words, the US lost jobs to China but gained cheap goods, including the aforementioned big-screen TV. In addition, the American job market shifted from manufacturing to the service industry. Researchers are unsure what these factors mean for the cost of living.

There has yet to be a study with conclusive evidence as to how much trade ties with China deflated American consumer spending. The unknown figure is the cost of the bill we're left to foot. And yes, that will include 10-foot big-screen TVs.

-Tim