Concerns have grown in the U.S. and elsewhere about the vulnerability of sprawling supply chains to disruptions like geopolitical tension, war, public health crises, and extreme weather. These fears coincide with discontent over the decline in manufacturing in advanced economies, attributed in part to import competition from China. But how much has this shifting sentiment on global trade actually restructured U.S. import value chains and their reliance on China? 

The data. Researchers analyze product-level trade data beginning in the 1990s using UN Comtrade to track import trends. To evaluate a country’s role in global value chains, they combine trade data with measures of each industry’s position within the production process (upstream versus downstream). They supplement this with multinational affiliate sales data from the U.S. Bureau of Economic Analysis and foreign direct investment (FDI) data from fDi Markets, providing insights into multinational-driven value chains. Data from the Bureau of Labor Statistics is also used to explore reshoring trends in U.S. manufacturing.

Most U.S. imports continue to be from high-income economies. In 1994, most U.S. trade was with Canada, the E.U., and Japan. China’s share of U.S. imports was only 6% then, but after joining the WTO, it became the largest single source of U.S. imports, peaking at 22% in 2017 before dropping to 17% in 2022. Import shares by region have remained stable since the 1990s: the E.U. (including the U.K.) accounts for around 20%, Canada and Mexico for 30%, and the Asia Pacific for 40%, though Japan and Canada have lost shares to China and Mexico. Nevertheless, goods from high-income countries still comprise the largest share of U.S. imports.

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Changes in share of U.S. imports from selected countries (2017-2022)

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U.S. exports persistently more upstream than U.S. imports. The main U.S. export goods include electronic circuits, machinery, and “goods-in-process” for further overseas assembly. Since the 2000s, U.S. exports have become more upstream due to rising agricultural exports and a shift to being a net petroleum exporter. In return, the U.S. typically imports relatively finished goods for final consumption or investment in its economy.

Source and composition of U.S. imports changing. From 2017 to 2022, U.S. imports from China dropped from 22% to 17%, while imports from Vietnam rose from 2% to 4%. Taiwan, India, Canada, Korea, and Mexico saw smaller gains, while Japan, Germany, the U.K., France, and Italy lost shares. Regression analysis shows Vietnam’s and Mexico’s import shares increased in products where China’s share declined, particularly for goods subject to U.S. tariffs on Chinese imports. 

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Changes in share of imports into Vietnam and Mexico from selected countries (2017–2022) 

 

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Not necessarily a shift away from dependence on China. Indirect supply chain links between the U.S. and China remain strong, and in some cases are growing. While U.S. import shares from Vietnam and Mexico have grown, import shares from China into these countries have increased even faster —  Vietnam’s from 28% to 33% (2017–2022) and Mexico’s from 18% to 20% (2017–2022). Mexico’s imports from the U.S. have declined over this period (46% to 44%). These trends are mirrored by rising Chinese FDI in Vietnam and Mexico, especially in manufacturing. To the extent that China’s exports comprise parts and components assembled into final goods and sent to the U.S., China would ultimately continue to be a relevant player in the upstream stages of U.S. supply chains. 

Mixed signs of U.S. reshoring. The U.S. manufacturing sector employed 12.9 million workers at the end of 2022 (10% of private employment). From 2017 to 2022, manufacturing employment rose by 0.6% per year, though the share of manufacturing employment in total private sector employment decreased, albeit more slowly than it had in the preceding five years (2012–2017). Factory and job counts have increased in sectors targeted by U.S. industrial policies (autos, electronics, semiconductors), but it is unclear what is driving these gains, given that some growth began before the U.S.-China tariff war, the Inflation Reduction Act, or the CHIPS Act. The strength and sustainability of these trends remain uncertain. 

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Changes in the number of U.S. establishments: electronics and semiconductors manufacturing (2005-2023)

Changes in U.S. employment: electronics and semiconductors manufacturing (2005-2023) 

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Global trade still vibrant, U.S. efforts to reduce dependence on China difficult and costly. Global trade has remained around 60% of world GDP since the 2008 financial crisis, despite the trade war, pandemic, and other shocks. Past research shows that U.S. tariffs have increased the unit prices of Chinese imports, with most costs passed on to U.S. firms and consumers. This analysis shows trade diversion to countries like Vietnam and Mexico also has raised import prices. Given current geopolitics, it is unlikely China will adopt the U.S.-based production model that Japan once did. Given China’s deepening trade ties with “friendshore” and “nearshore” nations like Vietnam and Mexico, Chinese-owned plants may continue to play an important role in U.S. supply chains.