Our Appetite for Imports
Do tariffs matter to the Hungry Beast?
I recently came across this commentary by long-time journalist and commenter, Fareed Zakaria. He provides a concise critique of both the Trump administration and the Biden administration, specifically with respect to how their respective policies have impacted the rate of inflation. Part of his critique relates to tariffs enacted by the former administration but largely maintained by the current administration. Higher tariffs imply higher prices on imports, which imply higher prices on the goods and services the American consumer likes to purchase.1
The latter begs a few questions. How large are imports relative to GDP? Have average prices on imports increased? And, does the Hungry Beast care?
Net exports (exports – imports) make up the fourth main category of Gross Domestic Product (GDP). Exports include the goods and services produced by U.S. businesses, on U.S. soil, and sold to non-U.S. residents. Imports include the goods and services U.S. residents purchase produced on foreign soil.2
Macrosight has chronicled the first three categories of GDP (consumption, investment, and government spending). Yet, much like Beatle aficionados ignoring Ringo Starr, Macrosight has hardly even mentioned Net Exports. In this post, we give Net Exports its Yellow Submarine.
The Trade Gap
Figure 1 displays Net Exports as a share of GDP since 1947.
A couple things stand out about Net Exports over the past seven-plus decades.
Since the mid-1950s, Net Exports has only been positive for three relatively brief spans of time. The last time we saw U.S. exports greater than U.S. imports was the early 1990s.
Since then the gap between exports and imports has widened considerably (this gap is often refereed to as our “trade deficit” or “trade gap”). As of the fourth quarter of 2023, that gap amounted to -$900 billion. This equates to 4.2 percent of GDP (shown on the graph as a negative 4.2 percent given the negative trade gap). The widest point occurred in the first quarter of 2022, with a gap equal to -$1.1 trillion, which amounted to 5.2 percent of GDP.
For another perspective, Figure 2 shows the dollar values of exports and imports separately (shown in 2017-constant dollars).
In Figure 2, one can see that since the mid-1990s the trade gap has widened steadily (which matches what we see in Figure 1).
And finally, Figure 3 displays the price index for U.S. imports, published by the Bureau of Labor Statistics, from January 2010 through March of this year (the index goes back to the early 1990s and can be seen in full here).
Over the last ten-plus years, the price of imports has been relatively volatile (which is true of the series going back to the early 1990’s, seen here), at least compared to the Consumer Price Index over the same period. As such, it is not uncommon for the average price of imports to experience rapid inflation or rapid deflation. For example, from April 2020 to May of 2022, the price index increased 25 percent. Yet, from June 2022 through March 2024, the index has fallen by just over six percent.
From February 2016 to October 2018, the first half of the Trump administration, import prices increased by about 9 percent.
From November 2018 through March 2020 the index fell by 6 percent (though most of that decline occurred from January to April of 2020; if we measure from November 2018 through December 2019, the index fell by about 1 percent).
Based on this price index, there does not appear to be consistent evidence (at least based on this simple data analysis) of tariffs leading to higher import prices.
A Tariff Effect?
How might any of this matter for the American consumer? If tariffs lead to higher prices on imports, we would either pay more for our imports, be inclined to import less, or both. While Figure 3 suggests there is not a clear-cut link with import prices and tariffs over recent years, maybe we can see something in the import data itself?
Figure 4 displays the total import series (shown in Figure 2) since 2007 along with a sub-category of the total, imports of consumer goods (excluding automobiles and food3)—each series represent constant 2017 dollars. Figure 4 displays the series converted into natural logarithms. With the variables in natural logs, we can get a sense of the rates of increase and decrease since 2007 (since with logged series, the slope of the line reveals the growth rates over various stretches of time).
The shaded region demarcates 2016 and on (though the Trump tariffs were imposed in mid-to-late-2018; see the timeline provided in this study). Some observations:
From the 2016 to about 2019 the slope of the consumer goods series is a bit flatter than what occurred from about 2012 to 2015. That corresponds to an average growth rate of 0.6 percent from ‘16 to ‘19, and to an average growth rate of 1.4 percent from ‘12 to ‘15. From 2018 through the end of 2019, the consumer goods category increases by about 0.3 percent. So, perhaps the tariffs had a small effect on consumer imports.
For the total imports there does not appear to be much of a difference in the slope of that series from 2012 through 2019. From 2012 through 2015, and then from 2016 through 2019, the average quarterly rates of increase were 0.8 percent and 0.6 percent, respectively.
On balance, there does not appear to be a obvious “before and after” story, at least there is not a big drop-off in consumer imports as the tariffs were imposed. Of course, this is purely an exercise in “eyeball data analysis.”
It is possible that the Hungry Beast would have happily consumed even more imports after 2018 if not for the imposition of tariffs. To discern such an effect one would have to carry out relatively sophisticated regression analysis, and/or dive much deeper into the issue than we have done here (as this previously-linked-to-study does as well as this one).
Moreover, it stands to reason that the nature of tariffs—which goods they are applied to and which countries—will affect various industries and categories of consumer goods differently. Our analysis here is from an aggregate perspective, which may mask any effects the tariffs have had on total imports or the importation of consumer goods.
April 2022 to today
Lastly, since April 2022, it is obvious from Figure 4 that imports have slowed, especially so for consumer goods. While the Biden administration has kept many of the Trump tariffs in place, they haven’t necessarily increased them or added new ones (well, not yet). It is possible the decline in imports since mid-2022 represents a very long lag effect of those tariffs. YET, as seen in Figure 3, import prices have also declined since mid-2022.
Diving into why imports and import prices have declined since 2022 would make this already-too-long-of-a-post much longer, and involve more sophisticated statistical analysis that this blog wishes to bore readers with. Moreover, it is possible that tariffs have affected the price of goods and services in the U.S., even if that is not obvious from the import price index (since many imports are the raw materials that U.S. companies use to produce our goods). Tracing out those linkages, too, would require much more analysis. For now, the only tentative conclusion one might draw from the figures above is that the Hungry Beast has not appeared that bothered by the Trump/Biden tariff-regimes.
As defined by the BEA, exports include “all goods and services sold, given away, or otherwise transferred by residents of the United States to foreign residents (also referred to as nonresidents or the rest of the world) . . . imports [include] all goods and services sold, given away, or otherwise transferred by foreign residents to U.S. residents.” See chapter 8 of the NIPA handbook for more details.
The sub-categories of total U.S. imports can be found here (and only go back to 2007). The breakdown of the total is not as user-friendly as other BEA series in that it is difficult to isolate the total amount of consumer spending-related imports from other categories (or, in the time I had to write this post, it proved difficult). The total imports category includes imports from consumers, businesses, and from local, state, and federal government. I focus on this consumer category since it is clearly focused on consumer spending whereas for the other categories it is less clear.