Why Does U.S. Import Goods That It Could Easily Produce Itself with Its Great Manufacturing Capability?

Why does U.S. import goods that it could easily produce itself with its great manufacturing capability?

As world is going globally, there are so much trades going on within the countries. We import and export from so much countries it’s hard to keep tracks. Each country of import and export is all different from each good to their destinations. From the recent data, South Korea is ranking in the 9 of the world ranking of import. It is reported that South Korea imported about $40.5 billion in the 2016. The following graph showed that EU (European Union including intra-EU trade) imported $2.24 trillion and followed by United States imported $2.2 trillion and China, $1.4 trillion. As you can see scale of U.S. import is huge. If you count these 3 countries’ import, it its almost one-third of the world’s total imports.  

What Does America Import?

As mentioned earlier in 2016 U.S. imported $2.2 worth of goods from around the world. Comparing from 2009, it has increased up to 40.6% and surprisingly it has decreased 2.4% if you compare from 2015. This is the list of U.S. top 10 import goods. All these goods mostly came from mainly 5 countries. These 5 countries supply over probably half of all U.S. imports. They are China, Canada, Mexico, Japan and Germany and in 2016 they supplied about 57% of the $2.2 trillion in U.S. imports.

1.Electrical machinery, equipment: U.S.$336 billion (14.9% of total imports)

2.Machinery including computers: $315.4 billion (14%)

3.Vehicles: $285 billion (12.7%)

4.Mineral fuels including oil: $163.4 billion (7.3%)

5.Pharmaceuticals: $92.5 billion (4.1%)

6.Optical, technical, medical apparatus: $80.8 billion (3.6%)

7.Gems, precious metals: $67.3 billion (3%)

8.Furniture, bedding, lighting , signs, prefab buildings: $63.1 billion (2.8%)

9.Plastics, plastic articles: $50.4 billion (2.2%)

10.Organic chemicals: $49.8 billion (2.2%)

China imports electrical equipment to U.S which is manufactured products made for U.S companies. Companies pay ship raw materials to China because China offers low-cost factory workers process the materials into the final products.

The biggest change occurred with the growth of imports from China. In 2007, 28 percent of all imports were from China and other low-income countries. This was a dramatic rise from 2000, when this value was only 15 percent.

Why Does America Import?

Even though America can produce all the goods, China, Mexico and other emerging market countries can produce the same goods for much less. Other countries require much less cost of living, which allows them to pay workers less. Using the theory of comparative advantage, it makes it better at producing what U.S. consumers want than American companies are. Recently United States has stopped producing some goods because foreign competitive efficiency. Companies from other countries produce the goods way faster, more cheaply and somewhat of better quality. Clothes could produce much cheaper in other countries and it is really happening this way. Like what I said earlier, due to comparative advantage, clothes can be manufactured more cheaply in developing countries due to the low cost of labor. By paying less to the worker, it allows you to maintain large profit margins and to sell your products at a cheaper cost by saving money in producing process. Another example is that for the electrical goods, they mostly depend on Japan and China. For China their labor cost is cheap and for Japan, it is for their specialists. Since they are good with electoral devices they likely to depend on them because their skills are trustful and they are the professional. United States imports from the countries with cheap prices and the countries that they can trust with their products.