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Import Source Reallocation and Aggregate Price Dynamics in the United States

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This paper studies the impact of changes in the composition of U.S. import sources on aggregate import prices and their implications for consumer prices. We decompose import price changes into within-source price adjustments and changes in sourcing composition. Using bilateral import data, we find that sourcing from lower-cost suppliers, particularly China, put sustained downward pressure on aggregate import prices until the mid-2010s. Since then, shifts away from China have partially reversed this effect, raising both import and consumer prices. We also find sourcing reallocation responds sharply to trade policy, playing a notable role during the 2018 U.S.–China trade war.

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  • Dawn Chinagorom-Abiakalam & Fernando Leibovici, 2025. "Import Source Reallocation and Aggregate Price Dynamics in the United States," Working Papers 2025-018, Federal Reserve Bank of St. Louis.
    • Handle: RePEc:fip:fedlwp:101434
    DOI: 10.20955/wp.2025.018
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    1. Raphael A. Auer & Claudio Borio & Andrew Filardo, 2017. "The Globalisation of Inflation: The Growing Importance of Global Value Chains," CESifo Working Paper Series 6387, CESifo.
    2. Aaron Flaaen & Ali Hortaçsu & Felix Tintelnot, 2020. "The Production Relocation and Price Effects of US Trade Policy: The Case of Washing Machines," American Economic Review, American Economic Association, vol. 110(7), pages 2103-2127, July.
    3. Alberto Cavallo & Gita Gopinath & Brent Neiman & Jenny Tang, 2021. "Tariff Pass-Through at the Border and at the Store: Evidence from US Trade Policy," American Economic Review: Insights, American Economic Association, vol. 3(1), pages 19-34, March.
    4. Redding, Stephen J. & Weinstein, David E., 2024. "Accounting for trade patterns," Journal of International Economics, Elsevier, vol. 150(C).
    5. W. Erwin Diewert, 1998. "Index Number Issues in the Consumer Price Index," Journal of Economic Perspectives, American Economic Association, vol. 12(1), pages 47-58, Winter.
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    Keywords

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    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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