This paper develops an unemployment, new economic geography framework by integrating Harris and Todaro (1975) and Krugman (1991) models to analyze the impacts of trade liberalization upon unemployment and deindustrialization; in particular, capital mobility and linkage effects are emphasized. It indicates that, without capital mobility, there exists a trade-off between unemployment and deindustrialization, and that the manufacturing industry declines for a country with unemployment in response to trade liberalization. In addition, intermediate inputs are needed in manufacturing producing—linkage effects, the higher the linkage effects are, the larger the impacts of trade liberation well be. When capital is allowed to flow between countries, like the role of linkage effects, the impacts of trade liberalization will be enlarged. As trade liberalization proceeds, all manufacturing industry may moves out of the country with unemployment, that in turn leads to become the periphery.