from the St Louis Fed

— this post authored by Fernando Leibovici, Economist

With recent changes in U.S. trade policy – particularly towards China, Canada and Mexico – economists and policymakers alike have been trying to identify the potential impact of these changes on the U.S. economy.

In previous posts, I have examined the role of imported intermediate inputs in the production of U.S. manufacturers, as well as the extent to which U.S. workers are involved in the production of goods sold overseas.

In this post, I investigate the importance of trade with China, Canada and Mexico relative to trade with the rest of the world. In particular, I used data from the Organization for Economic Cooperation and Development (OECD) for 2017 to examine the composition of U.S. imports and exports across countries and product categories.¹

Potential Impact of Trade Barriers on Households and Firms

One concern is that if U.S. imports of certain types of goods are concentrated in countries towards which trade barriers are raised, then this might negatively impact households that consume such goods or firms that use such goods as intermediates to produce other goods.

Similarly, if U.S. exports of certain product categories are concentrated in countries towards which trade barriers are raised, then this might negatively impact workers and firms that produce such goods. The destination countries, for instance, could retaliate by raising trade barriers on imports of U.S. goods.

Imports Composition across Countries and Product Categories

The figure below reports the import shares of goods from China, Canada and Mexico across different product categories.

First, U.S. imports of goods from China, Canada and Mexico accounted for a substantial share of aggregate U.S. imports. In particular, 22 percent of imports were purchased from China in 2017, while imports from Canada and Mexico each accounted for 13 percent. Thus, close to half of all U.S. imports came from these three countries.