What’s Driving the Recent Slump in U.S. imports?
The growth in U.S. imports of goods has been stubbornly low since the second quarter of 2015, with an average annual growth rate of 0.7 percent. Growth has been even weaker for non-oil imports, which have increased at an average annual rate of only 0.1 percent. This is in sharp contrast to the pattern in the five quarters preceding the second quarter of 2015, when real non-oil imports were growing at an annualized rate of 8 percent per quarter. The timing of the weakness in import growth is particularly puzzling in light of the strong U.S. dollar, which appreciated 12 percent in 2015, ...
Did Trade Finance Contribute to the Global Trade Collapse?
The financial crisis of 2008-09 brought about one of the largest collapses in world trade since the end of World War II. Between the first quarter of 2008 and the first quarter of 2009, the value of real global GDP fell 4.6 percent while exports plummeted 17 percent, as can be seen in the chart below. The dramatic decline in world trade—a loss of $761 billion in nominal exports—came through two channels: decreased demand for imports and supply effects, most likely arising from financial constraints. In this post, we look at evidence that supply effects, including curtailed funding for ...
Will New Steel Tariffs Protect U.S. Jobs?
President Trump announced a new tariff of 25 percent on steel imports and 10 percent on aluminum imports on March 8, 2018. One objective of these tariffs is to protect jobs in the U.S. steel industry. They were introduced under a rarely used 1962 Act, which allows the government to impose trade barriers for national security reasons. Although the tariffs were initially to apply to all trading partners, Canada and Mexico are currently exempt subject to NAFTA negotiations, and implementation of the tariffs for the European Union, Argentina, Australia, and Brazil has been paused. South Korea has ...
How did China’s WTO entry benefit U.S. prices?
We analyze the effects of China?s rapid export expansion following World Trade Organization (WTO) entry on U.S. prices, exploiting cross-industry variation in trade liberalization. Lower input tariffs boosted Chinese firms? productivity, lowered costs, and, in conjunction with reduced U.S. tariff uncertainty, expanded export participation. We find that China?s WTO entry significantly reduced variety-adjusted U.S. manufacturing price indexes between 2000 and 2006. For the Chinese components of these indexes, one-third of the beneficial impact comes from Chinese exporters lowering their prices, ...
What's behind volatile import prices from China?
In a sharp departure from earlier trends, the price of U.S. imports from China rose 6 percent in the 2006-08 period. To explore the forces behind this surprising increase, the authors create a new import index that uses highly disaggregated data to track price developments in different product types. The index reveals that the largest price increases were concentrated in industrial supplies - goods that rely heavily on commodity inputs. The authors conclude that the surge in commodity prices through mid-2008 was the primary driver of the rising import prices from China.
The Impact of Import Tariffs on U.S. Domestic Prices
The United States imposed new import tariffs on about $283 billion of U.S. imports in 2018, with rates ranging between 10 percent and 50 percent. In this post, we estimate the effect of these tariffs on the prices paid by U.S. producers and consumers. We find that the higher import tariffs had immediate impacts on U.S. domestic prices. Our results suggest that the aggregate consumer price index (CPI) is 0.3 percent higher than it would have been without the tariffs.
Does Import Competition Improve the Quality of Domestic Goods?
Firms must produce high-quality goods to be competitive in international markets, but how do they transition from producing low- to high-quality goods? In a new study (?Import Competition and Quality Upgrading,? forthcoming in the Review of Economics and Statistics), we focus on how tougher import competition affects firms? decisions to upgrade the quality of their goods. Our results, which we summarize in this post, show that stiffer import competition affects quality-upgrading decisions. For firms already producing very high-quality goods, lower tariffs induce them to produce goods of even ...
Why Renegotiating NAFTA Could Disrupt Supply Chains
Supply chains have become increasingly interlinked across the U.S.-Mexico border. The North American Free Trade Agreement (NAFTA), allowing tariff-free commerce between the United States, Canada, and Mexico, has facilitated this integration. Some critics of NAFTA are concerned about the bilateral trade deficit and have proposed stricter rules of origin (ROO), which would make it more cumbersome for firms to access the zero tariff rates they are entitled to with NAFTA. We argue that measures that make it costlier for U.S. firms to import will also hurt U.S. exports because much of U.S.-Mexican ...
Consumer Goods from China Are Getting More Expensive
We find that, in a sharp reversal of earlier trends, U.S. import prices for consumer goods shipped from China have been rising rapidly in recent quarters—by 7 percent between 2010:Q2 and 2011:Q1. In this post, we track U.S. import price movements in Chinese goods in different product categories by creating an import index that uses highly disaggregated data. We also consider the likely causes of the recent rise in prices for consumer goods. If these price hikes persist, they could have important consequences for U.S. businesses and consumers because China is the largest single supplier of ...
How much do bank shocks affect investment? Evidence from matched bank-firm loan data
We show that supply-side financial shocks have a large impact on firms' investment. We do this by developing a new methodology to separate firm-borrowing shocks from bank supply shocks using a vast sample of matched bank-firm lending data. We decompose loan movements in Japan for the period 1990 to 2010 into bank, firm, industry, and common shocks. The high degree of financial institution concentration means that individual banks are large relative to the size of the economy, which creates a role for granular shocks as in Gabaix (2011). As a result, bank supply shocks?that is, movements in ...