The Impact of U.S. Imports from China on U.S. Consumer Prices and Expenditures

31 Pages Posted: 22 May 2018

See all articles by Lawrence J. Lau

Lawrence J. Lau

Chinese University of Hong Kong-Institute of Global Economics and Finance

Junjie Tang

The Chinese University of Hong Kong (CUHK)

Date Written: April 30, 2018

Abstract

The objective of this study is to estimate the extent of the benefits to U.S. consumers that may be attributable to access to imported consumer goods from China. Imported consumer goods can keep the levels and rates of increases of the prices of consumer goods in the U.S. low, thus benefitting U.S. consumers. The focus is on the effects of imports of apparel and non-oil consumer goods on their prices in the U.S. and consequently on the respective U.S. household consumption expenditures on these goods. It will be demonstrated empirically that Chinese imports into the United States have helped to keep the prices of consumer goods low in the U.S. since 1994. It is found that between 1994 and 2017, a one-percentage-point increase in the share of U.S. apparel imports from China would lower the annual rate of growth of the U.S. apparel price index by approximately 0.2 percentage point. Similarly, a one-percentage point increase in the share of U.S. non-oil imports (which include apparel imports) from China would lower the annual rate of growth of U.S. non-oil price index by approximately 1.0 percentage point. The level of the U.S. CPI in 2017 would have been 27 percent higher if the share of U.S. non-oil imports originated from China had remained at its 1994 level of 6.2 percent. The reduced price of non-oil consumer goods has resulted in an estimated average annual saving for U.S. consumers of US$623 billion between 1994 and 2016, approximately 12 percent of the average annual U.S. non-oil consumer expenditure during the same period.

Suggested Citation

Lau, Lawrence J. and Tang, Junjie, The Impact of U.S. Imports from China on U.S. Consumer Prices and Expenditures (April 30, 2018). IGEF Working Paper No. 66. Available at SSRN: https://ssrn.com/abstract=3175677 or http://dx.doi.org/10.2139/ssrn.3175677

Lawrence J. Lau (Contact Author)

Chinese University of Hong Kong-Institute of Global Economics and Finance ( email )

13/F., Cheng Yu Tung Building
12 Chak Cheung St.
Shatin, NT
Hong Kong
+852 3943-1611 (Phone)
+852 2603-5230 (Fax)

HOME PAGE: http://www.igef.cuhk.edu.hk/ljl

Junjie Tang

The Chinese University of Hong Kong (CUHK) ( email )

Shatin, N.T.
Hong Kong
Hong Kong

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