How Cheap Are U.S. Imports from China?

The U.S. is undergoing a process of economic decoupling from China. This shift, marked by increased tariffs, export controls and initiatives to boost domestic production, represents a significant change in U.S. trade policy.

One implication of this process is that the prices of goods the U.S. imports may increase significantly. China is an important source of competitively priced products, and as U.S. companies seek alternative suppliers or reshore production, they may face higher costs. This could lead to increased prices for American consumers and businesses across various sectors.

This blog post examines the extent of China’s price advantage relative to alternative suppliers. In particular, we study 2023 trade data from the U.S. Census Bureau, with products disaggregated at the 10-digit Harmonized System (HS) level. The HS is a standardized system for classifying imported and exported products. Given the limited availability of price data, we use a proxy for prices called “unit values,” which are calculated by dividing the dollar value of imports by the quantity. While differences in unit values and prices may also reflect differences in quality or product characteristics, they can nevertheless provide valuable insights into broad pricing patterns and market positioning across countries and products.

What Countries Are the Cheapest Sources of Products to the U.S.?

We began our analysis by investigating the countries that are most likely to be sources of cheap products to the U.S. Our dataset consisted of roughly 13,000 unique products. For each product in our dataset, we compared the unit values across all source countries to identify the cheapest supplier. Then we calculated the share of products for which each country was the cheapest supplier. The figure below plots our findings for the top 10 U.S. trading partners.To focus on sufficiently significant trade relations, we excluded the lowest-value products, accounting for 1% of aggregate imports, as well as the lowest-value sources, accounting for 1% within each product.

Top U.S. Trading Partners by Share of Cheapest Products, 2023

SOURCES: U.S. Census Bureau and authors’ calculations.

The figure reveals that China is the cheapest source for 29% of products to the U.S., more than any other country. This dominance underscores China’s significant role in U.S. imports and its broad price competitiveness across a wide range of products. The next closest countries are Canada and Mexico, which lagged China considerably at 10% and 8% of all products, respectively.

It’s important to note that being the lowest-price supplier doesn’t necessarily indicate China is cheaper at supplying the same exact good that is sold by other countries at higher prices. Instead, it can also suggest that China has specialized in producing goods at lower price and quality segments within many product categories. This finding implies that shifting away from Chinese imports could lead to increased costs across a substantial share of U.S. imports. It also points to the challenge of finding alternative suppliers able to match China’s prices, which could be a significant hurdle in efforts to diversify supply chains.

To better understand China’s price competitiveness in U.S. imports, we broke down the product data across broad, two-digit sectors as classified by the U.S. International Trade Commission.

As the following figure shows, China is the cheapest supplier of products in several sectors. In some sectors, such as footwear and headgear and metals, the share of products with China as their cheapest source is particularly high. Advanced technology sectors like data processing machinery, semiconductors and electric motors (the lighter blue bars in the figure) also stand out. Any efforts to diversify supply chains or increase domestic production in these areas may face significant cost pressures.

U.S. Sectors by Share of Products with China as Their Cheapest Source, 2023

SOURCES: U.S. Census Bureau and authors’ calculations.

NOTE: The lighter blue bars in the figure identify advanced technology sectors, specifically data processing machinery, semiconductor devices, and electric motors and electrical resistors.

How Large Is China’s Price Advantage in the U.S. Import Market?

To quantify the extent of China’s price advantage in U.S. imports, we analyzed the relative price differences between Chinese imports and those from alternative sources. The next figure displays the differences in prices between products sourced from China and products in the same category sourced from the cheapest non-China source.

China’s Price Advantage over the Next Cheapest Source of U.S. Imports, 2023

SOURCES: U.S. Census Bureau and authors’ calculations.

For about 45% of the product categories that the U.S. imports from China, China offers unit values lower than the cheapest non-China alternative.The third figure focuses specifically on products sourced from China, which accounts for the difference in this value and the 29% share of all U.S. imports for which China is the cheapest supplier reported in the first figure. This highlights China’s strong position in lower-price market segments across many product categories, emphasizing the challenge of finding comparably priced alternatives for many goods. However, it’s important to interpret these results carefully. Lower unit values within product categories may reflect variations in quality, features or other characteristics rather than price alone.

These price differentials help explain China’s dominant position in U.S. imports. The data suggest that efforts to diversify supply chains or reduce reliance on Chinese imports could lead to increased costs for a significant portion of goods imported into the U.S.

Concluding Remarks

This analysis documents China’s significant presence in lower-unit-value segments of U.S. import markets, particularly in advanced electronics. As the U.S. seeks to diversify its imports, it may shift the price-quality mix of products sourced across various supply chains. The trade-off between cost differentials and strategic supply diversification will critically determine domestic economic outcomes and global trade dynamics over coming years.

Notes

1. To focus on sufficiently significant trade relations, we excluded the lowest-value products, accounting for 1% of aggregate imports, as well as the lowest-value sources, accounting for 1% within each product.
2. The third figure focuses specifically on products sourced from China, which accounts for the difference in this value and the 29% share of all U.S. imports for which China is the cheapest supplier reported in the first figure.