More than a quarter of US supply inputs into US industry are met through imports. This ranges from about 9% for farm related imports to as much as 84% for apparel and leather products. Import tariffs will affect both the end cost of consumer goods and exports. For the industries with the highest reliance on imports there are little current alternatives to sourcing from Mexico, China, Canada and the European Union.
The impact of tariffs
Late last year we provided a framework for assessing the impact of tariffs. Tariffs make goods more expensive, but how this translates into consumer and export prices depends on the import dependency of each sector. Where tariffs are not levied at equal rates to all countries and substitutes exist, a change in sourcing locations can mitigate some of the price impacts. In 2024, the US sourced about 41% of its imports from Mexico, China and Canada – the countries that have been first in line for steep tariff increases. The EU accounts for another 18-24% (depending on whether energy imports are counted or not. So all up almost two thirds. Every 10% tariff increase on imports from those countries would increase US import bills by $200 billion – or about $600 per capita.
Many US sectors rely strongly on imports
Input-Output data collected by the Bureau of Economic Analysis (BEA) indicated that approximately one quarter of supply to US industry sectors is met with imports. The two tables below give a snapshot of the origin and quantity of supply to US industry in 2023. Some products such as motor vehicles and parts, computers and electronics, machinery, oil and gas extraction, electrical equipment, appliances and components, apparel have a high level of import penetration. Others, such as food and beverages, petroleum or agricultural products do not.
Alternative sources do not necessarily exist
About 44% of us imports are concentrated in terms of origin country. This includes products such as office equipment, oil products, machinery, electrical equipment, chemicals, pharmaceuticals, toys, mobile phones and other high-tech items. Mexico, Canada, China and the EU feature as prominent sources.
And therein lies the problem
Where alternative non-dutiable sources exist for imports or where imports only account for a small share of overall supply, the impact on consumer and export prices may be minimum. Where import penetration is high and alternative sources do not exist, the import on consumer prices and export competitiveness is severe.
For example:
- Automotive (36% of supply from imports): Mexico, China and Canada account for 50% of 2024 import value, with most of the remainder from Japan, South Korea and Germany
- Computers and Electronics (54% from imports): Taiwan, Mexico and China account for 70% of imports, with Vietnam and South Korea most of the remainder
- Machinery (35% from imports): Mexico, China account for 33%, with Germany, Japan, Canada, South Korea and Italy most of the rest. But at a more micro level concentration increases.
A similar picture emerges for other groups such as electrical equipment, apparel, furniture, other manufactured items – all are highly dependent on imports and most of those imports are coming from the US’s top trading partners.