What Is an Import?
Let me tell you directly: an import is a good or service that you buy in one country but which was produced in another. You see, imports and exports make up the backbone of international trade. If a country's imports are worth more than its exports, that's a negative balance of trade, or what we call a trade deficit.
In the United States, we've been running a trade deficit since 1975. According to the U.S. Census Bureau, it reached $576.86 billion in 2019.
Key Takeaways
- An import is a product or service produced abroad and purchased in your home country.
- Imported goods or services are attractive when domestic industries cannot produce similar goods and services cheaply or efficiently.
- Free trade agreements and tariff schedules often dictate which goods and materials are less expensive to import.
- Economists and policy analysts disagree on the positive and negative impacts of imports.
The Basics of an Import
You should know that countries are most likely to import goods or services that their own industries can't produce as efficiently or cheaply as the exporting country does. They might also import raw materials or commodities that aren't available at home. For instance, many countries import oil because they can't produce it themselves or can't meet their demand.
Free trade agreements and tariff schedules determine which goods and materials are cheaper to import. With globalization and more free-trade deals involving the United States and other countries or trading blocs, U.S. imports of goods and services jumped from $580.14 billion in 1989 to $3.1 trillion by 2019.
These free-trade agreements and reliance on imports from places with cheaper labor appear to account for much of the decline in manufacturing jobs in the importing nation. Free trade allows importing from low-cost production areas, reducing dependence on domestic goods. This impact was clear in manufacturing jobs from 2000 to 2007, and it worsened during the Great Recession and the slow recovery that followed.
Disagreement About Imports
Economists and policy analysts don't agree on whether imports have positive or negative effects. Some critics argue that ongoing reliance on imports reduces demand for domestically made products, which can hinder entrepreneurship and business development. On the other hand, proponents claim that imports improve quality of life by giving consumers more choices and cheaper goods, and this availability helps prevent rapid inflation.
Real-Life Example of Imports
As of November 2020, the United States' top trading partners were China, Canada, Mexico, Japan, and Germany. Two of these—Canada and Mexico—were part of the North American Free Trade Agreement (NAFTA), which started in 1994 and created one of the world's largest free-trade zones at the time. With few exceptions, it allowed goods and materials to move freely between the United States, Canada, and Mexico.
It's important to note that the United States has had a continuous trade deficit since 1975. NAFTA is widely seen as having reduced automotive parts and vehicle manufacturing in the United States and Canada, with Mexico gaining the most in this sector. Labor costs in Mexico are much lower than in the United States or Canada, leading automakers to move factories there.
Under a trade agreement between the U.S., Canada, and Mexico, the minimum hourly wage for autoworkers on certain cars is $16. In 2018, these countries agreed to replace NAFTA with the United States–Mexico–Canada Agreement (USMCA). This new deal took effect on July 1, 2020.
Highlights of the USMCA
- Requiring automobiles to have 75% of their components made in one of the three member nations
- Setting a minimum wage for autoworkers and extending union protections and sanctions for labor violations
- Extending intellectual property copyrights and prohibiting duties on digital music and literature
- Giving the U.S. farmers access to Canada's dairy market
Other articles for you
The book-to-market ratio compares a company's book value to its market value to assess if a stock is under- or overvalued.
The Master of Public Administration (MPA) is a graduate degree that equips individuals for leadership and management positions in government, nonprofits, and related fields.
This text explains what lenders are, how they operate, and the key factors they consider when deciding on loans for individuals and businesses.
Price controls are government-set minimum or maximum prices for goods and services to manage affordability, but they can cause market disruptions over time.
Compensatory damages are monetary awards in civil lawsuits to reimburse plaintiffs for losses caused by defendants' negligence or unlawful actions.
The idiom 'boil the ocean' refers to attempting an impossible task or unnecessarily complicating a project.
Brand awareness refers to how well consumers recognize and positively perceive a brand, influencing their purchasing decisions and helping businesses build loyalty and market share.
The Ichimoku Kinko Hyo is a comprehensive technical indicator for assessing market trends and predicting support/resistance levels.
A product line is a group of related products sold under one brand to leverage consumer familiarity and expand market reach.
The neckline in technical analysis is a key support or resistance level in head and shoulders patterns that signals potential price reversals when broken.