Why Globalization Reaches Limits
Figure 1. Ratio of Imported Goods and Services to GDP. Based in FRED data for IMPGS.
Each time imported goods and services start to surge as a percentage of GDP, these imports seem to be cut back, generally in a recession. The rising cost of the imports seems to have an adverse impact on the economy. (The imports I am showing are gross imports, rather than imports net of exports. I am using gross imports, because US exports tend to be of a different nature than US imports. US imports include many labor-intensive products, while exports tend to be goods such as agricultural goods and movie films that do not require much US labor.)
Recently, US imports seem to be down. Part of this reflects the impact of surging US oil production, and because of this, a declining need for oil imports. Figure 2 shows the impact of removing oil imports from the amounts shown on Figure 1.
Figure 2. Total US Imports of Goods and Services, and this total excluding crude oil imports, both as a ratio to GDP. Crude oil imports from https://www.census.gov/foreign-trade/statistics/historical/petr.pdf
If we look at the years from 2008 to the present, there was clearly a big dip in imports at the time of the Great Recession. Apart from that dip, US imports have barely kept up with GDP growth since 2008.
Let’s think about the situation from the point of view of developing nations, wanting to increase the amount of goods they sell to the US. As long as US imports were growing rapidly, then the demand for the goods and services these developing nations were trying to sell would be growing rapidly.
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