US Imports, Including Top Categories, Challenges, and Opportunities
Love Imported Goods, But Hate Losing American Jobs?
According to the World Integrated Trade Solution, United States is the world's second-largest importer. It imported $3.1 trillion in 2019. That includes $2.5 trillion in goods and $597 billion in services.
Top U.S. Imports
The largest U.S. import category is capital goods at $678 billion. Businesses import $131 billion in computers and related equipment. They also import $117 billion in telecommunications and semiconductors.
The consumer goods category is almost as large at $654 billion. Most of this is pharmaceuticals ($149 billion) and cell phones/TVs ($132 billion). Next is apparel and footwear ($130 billion).
U.S. manufacturers import $522 billion of industrial supplies. Of this, $191 billion is oil and petroleum products. The United States also imports $376 billion worth of automobiles and $151 billion in food and feedstock.
Services is a large and growing category. In 2019, U.S. service imports totaled $588 billion. Almost half was travel and transportation services at $262 billion. The next was computer services and other business services at $161 billion. Finance and insurance services were $84 billion. The government services category was $24 billion.
More than half of U.S. imports come from five countries: China, Canada, Mexico, Japan, and Germany. These imports continue to rise despite President Donald Trump's trade war.
- As the world’s second-largest importer, the United States is burdened with a huge trade deficit.
- Although the United States is capable of manufacturing almost all of its imports, it gets much better prices when buying from other countries.
- President Trump imposed higher tariffs on U.S. trading partners such as China and Canada in an effort to lower the U.S. trade deficit.
- The U.S. economy’s reliance on imports has caused large losses in American jobs, especially in manufacturing.
Blame Imports for the Trade Deficit
The United States imports more than it exports. According to the U.S. Census, that creates a trade deficit of $485 billion. Even though America exports billions in oil, consumer goods, and automotive products, it imports even more of those same categories.
Low-Cost Imports Cost U.S. Jobs
Obviously, everything that is imported is not made in America. For that reason, a trade deficit increases U.S. unemployment.
The biggest change occurred with the growth of imports from China. In 2007, 28% of all imports were from China and other low-income countries. This was a dramatic rise from 2000 when this value was only 15%.
At the same time, the United States was losing manufacturing jobs according to a study in the American Economic Review. It found that in 2000, more than 10% of the labor force worked in manufacturing. By 2007, it had dropped to 8.7%. Not all of these losses were from outsourcing. Some were from the rise in robotics.
The study also found that job losses hit some communities harder than others. The cities and towns that lost out to Chinese competition also experienced higher costs for unemployment compensation, disability payments, health care, and early retirement. A study by Illinois Wesleyan University showed that $1 billion in imports from China reduced U.S. manufacturing by 0.48%.
At the same time, imports do create U.S. jobs in transportation, distribution, and marketing. For example, the Heritage Foundation estimated that imports from China created 500,000 of these jobs. But it's unlikely that these job gains offset the job losses in manufacturing.
Why America Imports So Much
Although America can produce all it needs, China, Mexico, and other emerging market countries can produce it for less. Their cost of living is lower, which allows them to pay their workers less. That makes them better at producing what U.S. consumers want than American companies could. This is called the theory of comparative advantage.
For example, Indian technology companies can pay their workers just $7,000 a year, much lower than the U.S. minimum wage. In other words, there's a trade-off between plentiful U.S. jobs and low-cost products. That's just one of the ways IT outsourcing affects the economy.
Many people say we should only buy items that are "Made in America." That would solve the problem only if everyone were willing to pay higher prices.
During his time in office, President Trump explored ways to force Americans to make this trade-off. He slapped tariffs on imports from various countries, including China. He pulled the United States out of the Trans-Pacific Partnership and the North American Free Trade Agreement (NAFTA).
Trump's renegotiation of NAFTA—known as the U.S.-Mexico-Canada Agreement on trade (USMCA)—took effect July 2020. Time will tell whether the renegotiated NAFTA has a significant impact on imports, cost of goods, or any other economic factors.
How the U.S. Imports Are Part of the Balance of Payments
- Current Account
- Capital Account
- Financial Account