Editor's note: China Daily's Media Unlocked had an in-depth conversation with James J. Heckman, director of the Center for the Economics of Human Development at the University of Chicago and Nobel Prize winner in Economics in 2000, about the so-called "China Shock 2.0". The phrase is being used to explain nearly all social problems in the United States. Excerpts follow:

Q: A lot of people are talking about "China Shock 2.0". How do you view this "China Shock"?

A: The "China Shock" is as follows. Suppose a company makes brake linings that can be produced more cheaply in, say, Guangzhou. When the product from Guangzhou is imported under a fair tariff regime, it replaces the product that was being made here before. So the China Shock is that some workers at that company lose their jobs. They certainly lose their jobs, but that analysis is incomplete.

What's missing in the "China Shock" story is that goods come in more cheaply, which helps intermediate producers who use those inputs to manufacture new goods in the US at lower costs.

For example, the import of clothes, furniture or electronics from China allows people in the US to buy products at much lower prices. This means they can get more value for their money. This benefit to consumers and the gains of intermediate producers are not counted in the "China Shock" story. A lot of politicians look only at the job loss but don't count the benefits.

Q: As you said, the "China Shock" actually boosts the US consumption economy. Then why is this "China Shock" narrative so popular?

A: In the US, you have the House of Representatives, and delegates get elected from various regions. If your town has been negatively impacted by a brake lining company from China, and jobs have been lost, you'll have a lot of unhappy factory workers who will vote against China.

The fact that I can buy clothes more cheaply at a store now, thanks to Chinese productivity, doesn't have the same ring to it.

People aren't jumping around the streets and saying, "Oh, look, I can get cheaper shoes, better cars or better electronics from China. And therefore, I will celebrate that." It's not as dramatic. Job loss is dramatic.

It's the concentration of the loss and the diffusion of the gains that really is the problem. Donald Trump has just picked that up as a way to get votes in disaffected areas, like coal mines in West Virginia, plants in Ohio and Pennsylvania, and misrepresented the economic benefits of the gains.

Q: How do you assess Trump's statement about "bringing manufacturing back to the US"? What will be the outcome?

A: Trump was really angry when the New York Fed correctly showed that 90 percent of the cost of tariffs was being borne by American consumers. It's a tax, you know.

They can call it a tariff. The argument out there is that China is cheating us, and if we put retaliatory tariffs, we're going to get much better tariff treatment. Generally speaking, tariffs prevent gains from trade and cheaper production.

Part of the problem, though, is political. There's a growing fear of China as a world power because China is now huge. It's growing. And it's dynamic.

Americans like the idea of being the No 1 power in the world. They have had that position since World War II, maybe even before. And now it's challenged. That challenge doesn't come lightly. The competitor now is not Russia, it's China. So there's a fear of China.

There's a book by Machiavelli, in which he states that the best way to keep power is to have an external enemy. If you want to build cohesion in your society, you should have an external enemy outside your society. And that's the message even today.

If you can create an external threat, people will rally around you. In this case, the Chinese are the external threat. They are threatening your jobs, they are threatening your ideas. So it's good politics, but it's not particularly good economics. And it doesn't really help in many areas.

Q: The internet connects countries across the world and young Chinese know American society pretty well. But why don't young Americans come to China, and understand China a little better by themselves?

A: Lot of young Americans on the internet are looking at wild, fabricated stories from various sources. You're giving them a rationality they don't possess. They're more interested in taking selfies and Taylor Swift than they are in China.

The political unity that used to characterize American society is disintegrating. There is a sense of partisanship and people are very hostile to each other. It's not just Republicans and Democrats. There's a feeling of the elites versus the ordinary people. There's a large group of Americans who feel that they've been left behind.

They see China as part of the problem because that's what they've been told. Go to middle America and you'll see very depressing towns. People who are unemployed or not well employed with low wages and poor expectations.

Add to that a huge drug problem. A lot of people are using not just fentanyl, but also other kinds of drugs such as opioids. These people are sleeping on the streets. It's easy to blame the Chinese as part of a general problem.

What I like about China's politicians is that they talk about international purpose. There's a sense that we're all in it together.

In the US, you have these factions that compete against each other. They don't care about the other factions. They just want to win for themselves. So they see it as a zero-sum game.

When Joe Biden was president, it was no better than Trump, maybe worse. He was just trying to buy votes. Think of the student loan issue. Those people borrowed money to go to college. But there were a number of people who didn't go to college.

They couldn't afford it. And they were supposed to pay the bills of people who did go to college. Billions of dollars should be paid by people poorer to these people who are richer and earn more. Biden didn't care about that. He just wanted to get their votes.

The views don't necessarily reflect those of China Daily.

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