What does 10-year trade statistics data of US imports from China and India tell us?

There has been some considerable discussion, debate, and media attention on reshoring of manufacturing operations to the US.  As China costs have risen, there has been a reported reshoring of manufacturing operations back to the US.  Some of the movement out of China has not always lead to the US shores.  Many operations/product sources have been moved to other low-cost countries, such as India.  Some have moved nearer to the US shores (nearshoring) to Mexico and Canada.  A.T. Kearney reports (1) that the U.S. Reshoring Index shows a distinct trend that there is more off-shoring happening than reshoring.  The graph below summarizes that fact.

It is worthwhile pointing out that this data is disputed by many who tend to believe that there is more reshoring than off-shoring.  This article is not intended to get embroiled in the debate since our primary objective is to study the China and India story.  This link is for those who may be interested in reading up on the reshoring vs offshoring debate.

In the backdrop of such discussions, it is a good idea to let data and facts drive analysis.  Let us take a look at some actual data with detailed analysis specific to US trade from China and India.

If we look at the US Imports data (absolute $ value of goods imported) from China and India, we can see that the off-shoring trend is continuing.

Looking at that above graph, it was difficult to ascertain if there was any significant shift of sourcing from China to India.   The graph below shows the imports into the US from China and India as a % of the total US imports from all over the world.

This graph does show India gaining some ground from 2008 onwards, indicating a bigger YOY increase (compared to pre-2008 data) with somewhat of a decrease around 2012. (Note: There is an order of magnitude difference in the imports from China as compared to those from India.  The data in the above graph has therefore been plotted using two separate axes for India and China so as to make it easier to see the trends discussed above.)

The data shows that the US imports about 10 times as much (USD) from China, as it does from India.  This trend has been relatively steady over the past 10 years.  The reasons behind this vast difference have a lot to do with the timing of the two countries in moving from a socialistic, government-controlled economic model to a free-market, competition-driven model.

An earlier study of the US Imports from China and India (2) examined the trade data from 1992-2012.   It found that:

  1. China’s shares in the US market, for both high-technology products and labor content heavy products, are substantially higher than that of India.
  2. China’s export basket, compared to India’s, is more diversified,
  3. The extent of export similarity between China and India in the US market is quite low.
  4. The data on unit prices of exports suggest that China has outperformed India in vertically differentiated products. This suggests that China by producing on a global scale, has managed to achieve lower average costs and unit prices for its exports compared to India

(Note: Definition of Product Differentiation: Two products are differentiated horizontally if, when the two prices are equal, some consumers prefer one product and other consumers prefer the other product.  Two products are differentiated vertically if, when the two prices are equal, all the consumers prefer the same product.  Thus horizontally differentiated products differ in characteristics, while vertically differentiated products differ in quality.)

From those findings, it can be inferred that exports from India have some distinctive advantageous characteristics despite the price and quality advantage of China.  In order to understand which products/commodity groups were the top drivers for US Imports, we looked at the top 25 products and the major commodity groups from both countries.  The results are shown in the tables below and the graphs that follow.

12 of the top 25 items imported from China dominate the global market share in those categories, ranging anywhere from between 25% to almost 80% of the total world imports into the US.

By contrast, only 2 (rugs; gems and diamonds) of the top 25 items imported from India had more than 25% of the global market share of imports coming into the US.

Industrial machines from India were at 1.64% of world imports compared to 14.67% of the total world imports coming from China.

The first “high tech” item on India’s top 25 list was Pharmaceutical preparations (4.2% of global market share of imports) and was higher than those coming from China (1.83%)

Petroleum Products (4.18% of global share of imports) from India were also significantly higher than those of China (0.67% of global share of imports).

A review of trade data like this allows for companies to make informed decisions about which of the two countries, India or China, would fare better in terms of price, quality, and delivery in a given product or commodity group.

Table 1: Top 25 Products Imported into the US from China from 2006 – 2015

The graph below is a comparative representation of the imports from India and China into the US, as compared to the total global imports in the respective commodity groups.

The data shows that:

  1. China exports almost 10 times in $ volume of products into the US as compared to India,
  2. China dominates the global share of US imports in at least half of the top-25 products it exports to the US,
  3. India’s top imports to the US are in non-industrial, relatively low-tech products like gems, cotton goods, jewelry, tobacco waxes etc. and textiles,
  4. India’s top 5 industrial, engineering or tech imports are in pharmaceuticals, petroleum products, organic chemicals, industrial machines and vehicle parts/engineered products.

Data analysis similar to the ones presented in this article will only help companies focus their cost savings efforts in the appropriate countries.  The data reflects which product categories and commodity groups have yielded success, historically.

Companies will always gravitate to profit maximization and initiatives that reduce costs.  That may involve moving manufacturing operations/product sources back to North America, finding an alternative low-cost country or investing in automation to drive down the long-term costs, or something completely different.  Regardless, low-cost country (LCC) sourcing is here to stay.  Once we come to grips with that fact, we can utilize historical trade data to leverage the cost savings advantages that other have benefitted from.  We can do this with the analysis and understanding of the dynamics of LCC sourcing trade.

References: