Rad Geek People's Daily

Reading: Adam Ozimek, Myths and Lessons from a Century of American Automaking (August 1, 2025)

Protectionists love talking about the auto industry. Believing it offers a potent example of the harms of globalization, their arguments have long been politically attractive to politicians on both left and right. Most recently they have justified the Trump administration’s 25 percent tariffs on auto imports by emphasizing the long-term decline of the industry.

It is time to set the record straight.

The protectionist argument for insulating the American auto industry from foreign competition not only draws the wrong lessons from history, it gets the history itself wrong. It rests on four myths, all of which I debunk in this analysis:

1. The U.S. auto industry has collapsed.
2. Globalization caused the death of Detroit.
3. Japanese imports nearly destroyed the auto industry in the early 1980s…
4. … until auto protectionism saved it.

Once these myths are set aside in favor of a clear, accurate understanding of the auto sector and its history, there is no reason to be optimistic that the Trump administration’s protectionist approach to the sector will work as intended. Indeed the case for it falls apart entirely. . . .

. . . [C]laims of vast deindustrialization ring true for certain manufacturing industries. Some goods really did stop, or mostly stopped, being made in the United States because of globalization.

Apparel, for example, is a quintessential globalized good, its factories shifting across the globe in search of the lowest labor costs. The United States once made a lot of clothes. Today it employs more than 90 percent fewer workers in apparel than it used to, and produces 90 percent less of the output. Apparel was a classic “China Shock” industry, where imports caused substantial and long-lasting economic disruptions in the parts of the country where it used to be concentrated.^[1]

But the domestic auto industry is different. It remains alive and well, with 10.5 million vehicles assembled in American factories last year. This number is down from the peak of the post-NAFTA boom period, but it is well above the depressed years of the 2000s and nearly equals the average of 10.3 million annual vehicles made in the pre-NAFTA period dating back to 1969.

And these production numbers actually fail to capture the true strength of the industry. The economic value of the cars being made has climbed substantially through the years. As a result, real value added and industrial production — two different ways of measuring actual output — are now at all-time highs.

What about jobs? The auto industry today employs 1 million workers. Between 1950 and the signing of NAFTA in 1993, it averaged 1.1 million workers, just slightly higher.^[2]

So much for Myth 1, the persistent notion that the American auto industry has collapsed. With output at all-time highs and employment hardly lower than in the time before NAFTA (the biggest globalizing event for the auto industry in recent decades), the evidence goes hard in the other direction.

II. The Detroit Whodunnit

But we are left with a puzzle. The perception that the auto industry has been decimated — and decimated specifically by globalization — is widespread. Where does it come from?

The likely answer is that in Detroit, the decline of the auto industry is certainly not a myth. But its very real decline was caused by competition not with the rest of the world, but with the rest of the United States.

— Adam Ozimek, Myths and Lessons from a Century of American Automaking
Economic Innovation Group Analysis, Reports (August 1, 2025)

1. ^[1]Autor, D.H., Dorn, D. and Hanson, G.H., 2013. The geography of trade and technology shocks in the United States. American Economic Review, 103(3), pp.220-225.↩
2. ^[2]For total U.S. auto employment, we utilize historical Census data for 1910 and 1920 from IPUMS, BEA SIC-based employment data, 1929-1989 pulled from NIPA historical tables 6.4A, 6.4B, and 6.4C, and BLS QCEW data from 1990 to 2023.↩