What is an Import?

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Definition:

An import is a good, resource, or service that is produced in one country and brought into another, to be bought and sold.

🤔 Understanding imports

An import is a product or service that is brought from one country into another. Imports allow countries to purchase goods and resources that they can’t produce on their own — or to produce them cheaper and more efficiently than they could domestically. For example: Without imports, people living in the United States couldn’t purchase champagne — because it, by definition, must be produced in the Champagne region of France. Some economies rely on imports more than others, but there are no countries that do not import any goods at all. In the U.S., for example, imports accounted for 15.3% of its gross domestic product (GDP) in 2018. To help protect domestic producers, many countries levy tariffs (fees and taxes) on certain imports.

Example

Toyota was the third-most-popular car brand in the U.S. by market share in 2019. However, unlike cars from Ford or General Motors, many Toyotas are not made in the U.S. Instead, they are produced in Japan and imported into the U.S. from abroad. When they are imported into the United States, the importing service is required to pay a tariff. This fee is then typically passed onto the consumer in the form of higher prices.

Takeaway

An import is like getting a gift in the mail...

If your chocolatier friend from across the country sends you a box of his latest confections in the mail, you’ll realize you probably couldn’t have made them yourself, but you’re sure happy he can! Similarly, when one country produces a product that another couldn’t easily make on its own, the latter country will import that product so that it can enjoy the other country’s unique talents or resources.

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What is an import?

An import is any product that’s produced abroad and then brought into another country. For example, if a Belgian company produces chocolate and then sells it in the United States, that would be an import from an American perspective. From a Belgian perspective, of course, it would be an export (goods that are sent away to another country).

Imports can be finished products, like cars, TV sets, computers, or sneakers, or they can be raw materials, such as zinc, oil, wood, or grains. They can also be services, like financial services, travel services, and insurance.

Imports are a vital part of the U.S. and global economy. Not every product, service, or raw material is readily available within U.S. borders, and some items are more cheaply or efficiently produced abroad. When the U.S. needs something from abroad, it imports it.

But importing goods and services isn’t so simple. While imports can allow a country to enjoy unique goods it couldn’t produce itself (or couldn’t produce as cheaply), there is a downside: countries that rely heavily on imports tend to see a decline in manufacturing within their borders.

To help combat this, governments often set tariffs, a specific type of tax, on specific imports. Ideally, these help domestic producers stay competitive in the international market.

But tariffs can backfire and lead to trade wars that hurt international trade, so governments need to be careful.

Tariffs and other protectionist policies can also raise prices for domestic consumers.

The workings of international trade are intricate. But you should know this: Imports are goods, services, and raw materials that are brought in from abroad, and they can have drastic effects on both countries’ economies and foreign policies.

What is import and export trade?

Imports and exports are an essential part of the modern, globalized economy. Just like businesses, countries often can make a niche for themselves as an exporter of a specific good.

For example, Brazil is the world’s largest coffee exporter, and its coffee production makes up a sizeable portion of its economy. If the United States or Japan, two of its largest trade partners, were to raise tariffs on imported coffee beans by just 2%, Brazil’s economy could take a massive hit.

In this way, imports and exports have helped many economies expand, but over-reliance on imported goods can also severely hurt a country. The U.S. is very reliant on pharmaceuticals from China, for example. When the coronavirus struck China, the supply chain for many medicines was interrupted, and some pharmaceuticals became scarce within the U.S.

Why are goods imported?

Countries typically import goods for a few reasons:

Domestic production is impossible: Some goods cannot be produced within a country’s borders. Maple trees can’t be grown in the Bahamas, for example. If Bahamians want maple syrup, they need to import it from other countries.

Cheaper to produce elsewhere: Sometimes, a country can produce a good on its own, but it’s cheaper to import it. This often occurs when the cost of labor is more affordable abroad than it is domestically. For example, the United States outsources much of its manufacturing work to China thanks to the lower labor costs there. It then imports the finished products into the U.S.

Another country does it better: Certain countries are renowned for their high-quality products. German automobiles (BMW, Audi, Mercedes Benz), for example, are famous around the world, and many countries import them despite having their own national brands.

More efficient to produce elsewhere: Certain countries can produce specific goods very efficiently, either because they invested more in that sector, or because they have a natural resource advantage. Canada is the world’s largest exporter of maple syrup, for example, thanks to its climate.

What are the types of imports?

Imports fall into six main types:

  1. Foods, feeds, and beverages: Goods that are consumed as food, livestock feed, or drinks. This includes produce, dairy products, wine, spices, coffee, etc.
  2. Capital goods: Goods that are used to produce other goods or services. This includes medical equipment, civilian aircraft, industrial engines, computers, etc.
  3. Consumer goods (excluding automotives): Goods that are purchased by consumers. This includes cosmetics, jewelry, apparel, household appliances, etc.
  4. Industrial supplies and materials: Goods intended for industrial or business use. This includes oil, electrical machinery, coal, lumber, precious metals, etc.
  5. Automotive products: Goods that are used to transport people, animals, and objects. This includes passenger cars, trucks, automotive engines and parts, etc.
  6. Other goods: Miscellaneous goods that don't fit into the other categories

Countries are often known for certain types of imports and exports. Japan is a leader in automotive products (its largest export), for example. Consequently, the U.S. imports a large number of Japanese cars.

What are some examples of imported goods?

The United States imports a large variety of goods. A considerable portion of cars driven and sold in the U.S. are imported from Japan, for example. From France, the United States receives champagne, and from Italy, Prosecco.

The United States relies on China for pharmaceutical goods and on Argentina, Chile, and Bolivia for the lithium found in rechargeable batteries.

Finding examples of imported goods isn’t hard — just take a look around you. Practically everything you own from your laptop to your headphones to your desk was either produced abroad or has parts that were produced overseas.

What are the top US imports?

As of January 2020, the top five countries that the U.S. imports goods from are:

  1. China
  2. Mexico
  3. Canada
  4. Japan
  5. Germany

The top five U.S. imports as of January 2020 are:

  1. Pharmaceuticals
  2. Passenger cars (new and used)
  3. Crude oil
  4. Vehicle parts and accessories
  5. Cell phones and other household goods

What are the effects of import trade on the economy?

Import trade can help or hurt an economy. When things go well, importing materials can help domestic companies produce their own products for less money and more efficiently.

However, too many imports can hurt domestic industries. For example, if China pays its factory workers far less than the federal minimum wage, it will almost always be able to produce goods at a lower price. This can hurt the American manufacturing industry as companies elect to produce their products abroad thanks to the lower Chinese labor costs.

To combat this, governments can impose tariffs on imports from China to raise the price of imports, boost domestic manufacturing, and even things out —But these types of measures, known as protectionism, don’t always work. Foreign countries can just as easily place tariffs on U.S. imports, which can end up hurting the U.S. economy further. What’s more, protectionist policies raise prices for consumers and tend to stifle innovation in domestic industries, by propping up non-competitive domestic producers.

Imports can have drastic effects on economies, so government leaders generally make significant efforts to work out trade agreements with trading partners that smooth out the trade balance.

If a country imports more than it exports, it runs a trade deficit. The opposite is known as a trade surplus. The U.S. currently runs a trade deficit — It was $616.8 billion in 2019.

Economists haven’t reached consensus as to what a trade deficit means for economic growth, GDP, and domestic jobs. Trade deficits are neither good nor bad, but they can affect other economic and political decisions.

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New customers need to sign up, get approved, and link their bank account. The cash value of the stock rewards may not be withdrawn for 30 days after the reward is claimed. Stock rewards not claimed within 60 days may expire. See full terms and conditions at rbnhd.co/freestock. Securities trading is offered through Robinhood Financial LLC.

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This information is educational, and is not an offer to sell or a solicitation of an offer to buy any security. This information is not a recommendation to buy, hold, or sell an investment or financial product, or take any action. This information is neither individualized nor a research report, and must not serve as the basis for any investment decision. All investments involve risk, including the possible loss of capital. Past performance does not guarantee future results or returns. Before making decisions with legal, tax, or accounting effects, you should consult appropriate professionals. Information is from sources deemed reliable on the date of publication, but Robinhood does not guarantee its accuracy.

Robinhood Financial LLC (member SIPC), is a registered broker dealer. Robinhood Securities, LLC (member SIPC), provides brokerage clearing services. Robinhood Crypto, LLC provides crypto currency trading. All are subsidiaries of Robinhood Markets, Inc. (‘Robinhood’).

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© 2022 Robinhood. All rights reserved.