INVESTING INVESTING ESSENTIALS
Import Definition
By
TROY SEGAL
Reviewed by
GORDON SCOTT Updated Jan 20, 2021
What Is an Import?
An import is a good or service bought in one country that was produced in another. Imports and exports are the components of international trade. If the value of a country's imports exceeds the value of its exports, the country has a negative balance of trade, also known as a trade deficit.
The United States has run a trade deficit since 1975. The deficit stood at $576.86 billion in 2019, according to the U.S. Census Bureau.1
KEY TAKEAWAYS
The Basics of an Import
Countries are most likely to import goods or services that their domestic industries cannot produce as efficiently or cheaply as the exporting country. Countries may also import raw materials or commodities that are not available within their borders. For example, many countries import oil because they cannot produce it domestically or cannot produce enough to meet demand. Free trade agreements and tariff schedules often dictate which goods and materials are less expensive to import. With globalization and the increasing prevalence of free-trade agreements between the United States, other countries and trading blocks, U.S. imports of goods and services increased from $580.14 billion in 1989 to $3.1 trillion as of 2019.1
Free-trade agreements and a reliance on imports from countries with cheaper labor often seem responsible for a large portion of the decline in manufacturing jobs in the importing nation. Free trade opens the ability to import goods and materials from cheaper production zones and reduces reliance on domestic goods. The impact on manufacturing jobs was evident between 2000 and 2007, and it was further exacerbated by the Great Recession and the slow recovery afterward.2
Disagreement About Imports
Economists and policy analysts disagree on the positive and negative impacts of imports. Some critics argue that continued reliance on imports means reduced demand for products manufactured domestically, and thus can hobble entrepreneurship and the development of business ventures. Proponents say imports enhance the quality of life by providing consumers with greater choice and cheaper goods; the availability of these cheaper goods also help to prevent rampant inflation.
Real Life Example of Imports
The United States' top trading partners, as of November 2020, included China, Canada, Mexico, Japan, and Germany.3 Two of these countries were involved in the North American Free Trade Agreement (NAFTA) that was implemented in 1994 and, at the time, created one of the largest free-trade zones in the world. With very few exceptions, this allowed the free movement of goods and materials between the United States, Canada, and Mexico.4
The United States has experienced a continuous trade deficit since 1975.1
It is widely believed NAFTA has reduced automotive parts and vehicle manufacturing in the United States and Canada, with Mexico being the main beneficiary of the agreement within this sector. The cost of labor in Mexico is much cheaper than in the United States or Canada, pushing automakers to relocate their factories "south of the border."
$16
The minimum hourly wage paid to autoworkers for certain cars under a trade agreement signed between the U.S., Canada and Mexico.5
In 2018, the U.S., Canada, and Mexico agreed to replace NAFTA with the United States–Mexico–Canada Agreement (USMCA).6 Its highlights include:
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 violations5
Extending intellectual property copyrights and prohibiting duties on digital music and literature7 8
Giving the U.S. farmers access to Canada's dairy market9
The USMCA took effect on July 1, 2020.10
ARTICLE SOURCES
Related Terms
North American Free Trade Agreement (NAFTA)
The North American Free Trade Agreement (NAFTA) was implemented in 1994 to encourage trade between the countries of United States, Mexico, and Canada.more
Maquiladora
A maquiladora is a Spanish term for a factory located near the United States-Mexico border that operates under a favorable duty- or tariff-free basis. more
Trade Liberalization Explained
Trade liberalization is the removal or reduction of restrictions or barriers, such as tariffs, on the free exchange of goods between nations. more
Trade War
A trade war arises when one country retaliates against another by raising import tariffs or placing other restrictions on the other country's imports. more
What Is the Net Exports Formula?
A nation's net exports are the value of its total exports minus the value of its total imports. The figure also is called the balance of trade. more
Introduction to Section 232 of the Trade Expansion Act
Trade Expansion Act of 1962 Sec. 232 authorizes the U.S. President to adjust imports of goods from other countries through tariffs and other means. more
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