China (U.S.) fact of the day

Whereas goods labeled “Made in China” make up 2.7% of U.S. consumer spending, only 1.2% actually reflects the cost of the imported goods. Thus, on average, of every dollar spent on an item labeled “Made in China,” 55 cents go for services produced in the United States. In other words, the U.S. content of “Made in China” is about 55%.

Here is more, source is Doug Henwood on Twitter.


How about the other direction? Does everything imported in China that says "Made in the USA" contain 100 percent US content? In that connection did you see the piece about a Georgia outfit exporting chopsticks to China ( tip Freakonomics.

My favorite US-China Trade war Story: China wants to impose anti-dumping tariff's on chicken feet imported from the US,8599,1960825,00.html

That's cute! Aren't there chicken hearts, or chicken liver case too?

"In other words, the U.S. content of “Made in China” is about 55%."

That sentence is misleading at best, and untrue with a straightforward reading. Any article, whether made in the US, China, or Zimbabwe, can be of 100% content from the labeled country... and you would still expect a total markup from wholesale to retail which more or less doubles the price. What is new or unusual about this?

Stuff from China only makes up 2.7% of US spending??? How do you get from there to all the claims about how how economically dependent the US is on China for goods?

Should've replied directly here. I think my comment below explains it.

1.2% of GDP is a huge number....

The number isn't _that_ huge. The precentages are given relative to consumer spending, which is only 70% of GDP ... still a lot, but they're not the same.

Andrew Smith,

"1.2% of GDP is a huge number…."

Indeed. And it the correct number is 1.9% (at least). I quote from the article

"The total share of PCE that goes for goods and services imported from China is 1.9%. This is 0.7 percentage point more than the share of Chinese-produced final goods and services in PCE. This difference is mainly due to the use of intermediate goods imported from China in the U.S. production of services. "

More importantly, doesn't this undermine the fallacy of our "consumer economy" that allegedly makes up 70% of the total economy. In this small example, 45% of the Made In China dollars shouldn't be counted toward the mythical 70%.

2.7% is a surprisingly small portion (at least to me) considering the frequent charges that we've lost all our jobs to China and WalMart is destroying America by selling inexpensive Chinese goods. I thought maybe it was because goods made in America from parts manufactured in China were a larger chunk of sales, but according to the study goods "Made in U.S. from parts imported from China" only accounts for 0.7% of consumer spending. (Collectively it's 5.9% for parts from all countries). The "Made in U.S. from U.S. parts" number of 81.9% is higher than I would have expected.

I suspect most politicians' guesses would be wildly off if they were asked about these percentages.


The numbers look low because services account for 66.9% of PCE. The import content of services is low. Goods account for the other 33.1% of PCE. However, 13.9% of PCE is food and fuel. That leaves 19.2% of PCE for non-fuel/food goods. Of the 19.2%, 9.9% is durable goods. 26.3% of the value of durable goods is imported (7.3% from China). The other part of the 19.2% is non-durable goods which are 9.3% of PCE. Perhaps 33% of the value of non-durable goods is imported. Half of that might be from China.

Big numbers.

Interesting, thanks for the explanation. Is all PCE spending considered to be roughly equal in terms of it's impact on the economy or is spending on durable goods (for example) presumed to create more jobs than food and fuel? If it's all roughly the same then ultimately the share of PCE devoted to imported goods seems relatively modest, in terms of GDP, no?

"Is all PCE spending considered to be roughly equal in terms of it’s impact on the economy or is spending on durable goods (for example) presumed to create more jobs than food and fuel? "

Clearly "it depends". The U.S. imports the marginal barrel of oil. Doesn't create too many jobs. Conversely, if we pay for that barrel with incremental exports (rather than more debt), maybe it does. Broadly stated, I would say that food and fuel are relatively capital intensive and durable goods are more labor intensive. However, services are (in general) more labor intensive than goods.

Here is a thought exercise. Assume the U.S. economy is operating below capacity with relatively high unemployment (like now). Say the U.S. stopped importing textiles. Textiles are highly labor intensive (which is why we import them). Replacing imported textiles would require large quantities of domestic labor and significant amounts of capital. Obviously, textile prices would rise.

That would be a net detriment to existing textile consumers (assuming they have jobs) and a net gain to the formerly unemployed workers. It would also be a net gain to the government (lower social spending, higher taxes). Overall, GDP would rise and, on average, Americans would be better off. I should say that it is not clear that then median American would gain.

Interesting thought experiment. Of course if textiles became prohibitively expensive to import it might result in another outcome-- advancements in automation that make domestic production viable and people unnecessary.


During the housing bubble after 2000, residential fixed investment rose by 2% of GDP. Since the peak, residential investment has fallen by over 3% of GDP. See for a graph.

As you can see, 2-3% shifts in GDP can have very large overall effects.

Look at the tables for furniture and clothing...

now think about how often one is exposed to furniture and clothing purchases, relative to all of the other categories. Now think about the value of those purchases relative to the other categories.

It's amazing how observation bias can influence us :)

> 2.7% is a surprisingly small portion

Well, it could be that the proportion of income spent on manufactured goods used to be considerably smaller before the Chinese became heavily involved.

Note that the numbers may not even be correct. PCE for 2010 was almost exactly $10 trillion. Imports from China (goods only) were $364 billion. That implies that the 1.9% number (not 1.2%) may be wrong.

Starting with the bad news --this is not a fact. The paper just presented some data that none knows how reliable they are and the authors' opinions.

And then the good news --Tyler was able to be neutral about "the fact". I cannot be neutral --it's not relevant to any serious conflict of facts, values, or interests.

Hope Tyler and all MR readers remember that to be admissible to adjudicate a conflict, evidence must be relevant and reliable.

If not for Chinese labor costs, we'd have to spend considerably more than 1.2%:

Despite large increases in recent years, hourly compensation costs in China’s manufacturing sector remained only 4 percent of those in the United States in 2008.

I didn't mean to imply that it's only Chinese labor costs that are holding prices down. Many nations have cheap labor (and enough organization to make it usable).

I just did a quick Google search, and in 2010 the US imported $365B in goods from China. The GDP of the US in 2010 was about $15T. Taking the ratio gives 2.4%. Doesn't this imply that your fancy calculations are underestimating the amount we send to China purchasing Chinese goods and services?


I think it does. Of course, not all goods imported from China are used (directly or indirectly) for personal consumption. Some are probably used for investment (drywall for new homes). By category, imports from China appear to be consumer oriented. However, I haven't seen a breakdown between consumer and capital goods imports.

Let me try one more time.

The difference between wholesale and retail is about 100% markup, or 50% profit. This has changed little since the Persians were trading with the Romans. The linked paper shows that profit on Chinese goods is 55%. Whoop-de-do. How is this new or unusual?

"How is this new or unusual?"

I don't think they are suggesting it's a new phenomena. I believe the message is: 1) Even when consumers by a "Made In China" good it doesn't mean all the money goes to China, in fact more than half of it stays here, and by extension 2) money spent on "Made In China" products are still good for the U.S. economy because Americans are employed to ship, sale and maintain the goods once they're here. (like a Lenovo laptop for instance).

The true value of US import from China is even LOWER. Majority of the products that we import from China are actually made for US corporations like Walmart, Target, and Apple. China contributes very little to the total value of the final products: an iPhone that sold $700 retail without contract contains about $9 value contributed by China, most in labor. The raw materials were imported to China to produce iPhone. And majority of the total value of iPhone in fact is Apple's profit, retained outside of the US to avoid paying taxes to Uncle Sam!
So we really don't have a trade deficit with China. We have a huge trade deficit with US Coprorations.


Of course, goods from China get marked up before they are sold retail in the U.S. However, imports from China cost $365 billion in 2010. That's the amount we paid China for the goods, China sent the U.S. Some portion of that $365 ended up in the hands of U.S. corporations operating in China and some portion was spent buying raw material and intermediate goods to produce that $365 billion in goods.

However, don't fall for that $9 per iPod line. China didn't accumulate $3.045 trillion in foreign exchange returns by collecting $9 for iPods.Check out "Value-added in China’s export sector and China’s exposure to a global slump" ( It appears that 50% of the value of China's exports was created in China. Note that much of the other 50% is imports from other countries in Asia.

Now one can see why the US chamber of commerce lobbies to reduce trade barriers instead of lobbying for, say, reduced corporate medical costs here in the US.

A favorite from a friend who drives a Toyota:
"Americans make great Japanese Cars."

why would the trade deficit even matter. after all the chinese are paid in usd and have to spend it in the us.

Interesting use of 'service' as I assume a large amount of that 55 cents is added cost from tariffs and other trade barriers

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