In recent decades, the US has grown increasingly dependent on imports from China to access a vast variety of goods. The FRED graph above shows Chinese import data: From 1990 through 2016, as China became a globally integrated economy, the US import share from China grew steadily, from close to 2% of aggregate US imports in the late 1980s to close to 22% in 2016.
In recent years, however, policies have been enacted to reduce this dependence on China, as illustrated by the trade war during the Trump administration and the CHIPS and Science Act of 2022. Indeed, the US import share from China has declined from 22% to 14% since 2016.
As the cost of importing Chinese goods has increased, the incentive to produce goods domestically has also increased. So, to what extent is the US-China decoupling leading to a resurgence of American manufacturing? We investigate this question in the FRED graph below, plotting manufacturing investment in structure and equipment, as well as employment and output.
On the one hand, there has been a resurgence of manufacturing investment in structures since 2020. These investments may indicate that American manufacturing overall is indeed resurging, with investments in structures more than doubling in a short period.
On the other hand, output, employment, and investments in equipment haven’t increased in tandem with the growth of investment in structures. We interpret these findings as evidence that American manufacturing may be resurging, but that the resurgence may take time: Investment in structures is time-intensive and precedes the growth of employment and output that results once new manufacturing plants are completed.
How these graphs were created: First graph: Search FRED for and select “U.S. Imports of Goods by Customs Basis from China.” From the “Edit Graph” panel, use “Edit Line 1” to add “U.S. Imports of Goods by Customs Basis from World” to the existing series. Under “Customize data,” type a/b into the formula bar, and click “Apply.” Set “Modify Frequency” to “Annual.”
Second graph: Search FRED for and select “Real private fixed investment: Nonresidential: Structures: Manufacturing/Real Gross Domestic Product.” From the “Edit Graph” panel, use “Add Line” to add “Real Gross Private Domestic Investment: Fixed Investment: Nonresidential: Equipment,” “Manufacturing Sector: Real Sectoral Output for All Workers,” and “All Employees, Manufacturing.” Under the “Edit Line” tab for each of the four lines, change the “Units” to “Index (Scale value to 100 for chosen date)” and enter “2010-01-01” for the base period.
Suggested by Jason Dunn and Fernando Leibovici.
