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How Much Do We Spend on Imports?

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How Much Do We Spend on Imports?

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An examination of the cost of imports yields important implications for US trade policy.

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9

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  • Analytical
  • Eye Opening
  • Hot Topic

Recommendation

The politics of trade is under the microscope today, but most people don't grasp how changes in one aspect of trade can reverberate throughout an economy.  This enlightening examination from economists Galina Hale, Bart Hobijn, Fernanda Nechio and Doris Wilson of what goes into the cost of imports has important implications for US trade policy. Their rigorous and granular analysis will help to inform the debate among economists and policy experts.

Summary

Even after globalization has linked the world through extensive trade relationships and complex supply chains, most of the goods and services sold in the United States are still produced within its borders.

When an American buys an imported good, a relatively small part of the price goes to the foreign manufacturer. For example, if you pay $100 for Nike shoes, the factory in China that produced them earns $25. Shipping costs to the United States consume $3.50, and Nike collects $21.50 to pay for marketing, design and profits. That leaves $50, which ends up in the US retailer...

About the Authors

Galina Hale, Fernanda Nechio and Doris Wilson are researchers with the Federal Reserve Bank of San Francisco. Bart Hobijn is a professor at Arizona State University. 

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