The importance of imports of capital and intermediate goods to the U.S. economy

See The importance of imports: Import tariffs, imports of production inputs, and domestic investment from the Federal Reserve Bank of St. Louis. 

"U.S. trade policy continues to change, with rising tariffs on imports of capital goods and intermediate inputs from China and other countries. But how important are these types of imports for the U.S. economy, especially compared with total U.S. imports? As usual, FRED can help answer our question: The graph above plots the share of capital and intermediate inputs in aggregate U.S. imports over the period 1999-2019.

As the graph shows, the share is not small. In fact, it’s the majority of total imports, ranging from 46% to 61% over this period, with an average well above 50%. Because these imports play an important role for the domestic production of U.S. goods, one would expect that raising tariffs on these goods would have a negative impact on domestic production.

Again, FRED sheds some light on the question: The graph below shows that imported capital goods make up a substantial fraction of aggregate investment, ranging from a bit under 12% to almost 18% for 1999-2019. In particular, the share of imported capital goods in gross fixed capital formation has been growing over the past two decades: Between the 2001 recession and the Great Recession, it was in the 12% to 14% range; after the Great Recession, the values were largely above 16%.



"U.S. trade policy continues to change, with rising tariffs on imports of capital goods and intermediate inputs from China and other countries. But how important are these types of imports for the U.S. economy, especially compared with total U.S. imports? As usual, FRED can help answer our question: The graph above plots the share of capital and intermediate inputs in aggregate U.S. imports over the period 1999-2019.

As the graph shows, the share is not small. In fact, it’s the majority of total imports, ranging from 46% to 61% over this period, with an average well above 50%. Because these imports play an important role for the domestic production of U.S. goods, one would expect that raising tariffs on these goods would have a negative impact on domestic production.

Again, FRED sheds some light on the question: The graph below shows that imported capital goods make up a substantial fraction of aggregate investment, ranging from a bit under 12% to almost 18% for 1999-2019. In particular, the share of imported capital goods in gross fixed capital formation has been growing over the past two decades: Between the 2001 recession and the Great Recession, it was in the 12% to 14% range; after the Great Recession, the values were largely above 16%.




These specific imports comprise a significant portion of both total U.S. imports and domestic investment, which suggests that the ongoing changes to U.S. trade policy might have a negative impact on firms that rely on these capital goods and inputs to conduct their productive activities. In particular, tariffs on capital goods might negatively affect aggregate U.S. investment and, thus, aggregate output."