After the onset of the COVID-19 pandemic, import inflation in the United States reached a level not seen since the 1970s. Some attribute the import inflation to stimulus packages issued by the federal government, while others attribute the import inflation to supply issues in trade partners. In their paper, “What drives U.S. import inflation?” (National Bureau of Economic Research, Working Paper 32133, February 2024), Mary Amiti, Oleg Itskhoki, and David Weinstein use international trade data from the United Nations to isolate the impact of global forces and country-specific supply and demand effects on import inflation for the world at large and, subsequently, the United States.
The authors begin by looking at import inflation on a global level. Before the pandemic (throughout 2019) and as the pandemic unfolded (in the first three quarters of 2020), world import inflation decreased. Starting in the fourth quarter of 2020, as economies began to reopen, and ending in 2022, the authors find that world import price inflation was mostly driven by global forces rather than country-specific supply shortages or demand surges. After looking at global import prices, the authors turn to U.S. import inflation.
In 2021, U.S.-specific import inflation rose drastically before falling in 2022. U.S. import inflation peaked at a lower rate than global import inflation but (unlike global import inflation) remained somewhat high into the second half of 2022. According to the authors, the import inflation’s resilience was largely the result of shortages in a few U.S. trading partners and recovering U.S. import demand from the pandemic. To get a better understanding of what types of goods drove these trends, the authors disaggregated the U.S.-specific data by BLS end-use categories.
The authors find that U.S. import inflation in commodities (fuels, foods, and industrial supplies) was largely driven by global trends. By contrast, U.S. import inflation in differentiated products (products that are not standard in nature) was more strongly tied to a resurgence in U.S. import demand and shortages in specific trading partners. For example, in the fourth quarter of 2022, burgeoning U.S. import demand heavily affected light emitting diode (LED) displays, cellular and wireless telephones, and motorcycles, among other goods. On the supply side, in the third quarter of 2022, shortages in a handful of supplying countries limited U.S. imports of many goods, such as data processing machines, tripods, and air conditioners.
With all of these pieces taken together, Amiti, Itskhoki, and Weinstein conclude that events with global implications (such as the pandemic, the Russia-Ukraine war, and the post-COVID commodity boom) had a profound effect on global import inflation until mid-2022. For the rest of 2022 and beyond, however, insufficient production by specific trading partners and rising U.S. demand became the primary driving forces of import inflation in the United States.
United States Department of Labor
