Imports to U.S. keep rising, despite weaker dollar

Imports to U.S. keep rising, despite weaker dollar

The back-ordered Prius, with its hybrid gasoline-electric engine, is entering the United States as fast as Toyota can turn the car out: 7,000 were shipped from Japan in February and the same number in January. .
That is just one of many indicators of how the everyday needs and desires of Americans keep imports rising despite a weaker dollar..
This winter, foreign shipments to the United States also carried extra loads of tires from the Far East, refrigerators from Mexico and South Korea, costume jewelry from Austria and China, front-loading washing machines from Germany and fully assembled computers from China..
These are among the imports that have increased most quickly in recent months, helping to swell the January import bill to $159.1 billion, a record for any month. That comes after the 2004 U.S. trade deficit reached a record $617 billion..
Just when, at least in theory, imports should be falling or at least leveling off in response to a dollar that no longer buys as much in euros, pounds and yen, goods from abroad have continued to surge into the United States..
Imports now equal 16 percent of the overall U.S. economic output, up a full percentage point in just one year. They represented only 11 percent of the gross domestic product a decade ago. But while imported finished goods like costume jewelry and clothing are what people notice most, what they do not see is even more significant..
While the rising price of oil and trade liberalization, especially the removal of quotas on textile imports at the start of this year, have added to the U.S. import bill, the biggest change in recent years is that American companies increasingly import many of the parts and components that go into the products they make in the United States, drawing on the global economy to supply what they once made at home..
So when factories raise their production, as they are doing in the currently robust economy, foreign-made parts and components flow into the country in ever greater quantities..
Exports also grow, but imports are rising faster, and the American trade gap widens..
"American companies are doing more things abroad and bringing them back to the United States," said Diana Farrell, director for the global institute at McKinsey, the consulting firm..
"We have had these big dollar devaluations, and we don't see the commensurate drop in imports. The reason is that the companies are pursuing labor cost savings that offset exchange rates.".
That helps to explain why gasoline engines purchased abroad for cars assembled in the United States were up 8 percent in January, to $960 million..
Imported steering and suspension mechanisms also shot up 8 percent in January, to $312 million, accounting for most of the 19 percent increase in these items over 12 months, according to an analysis of Census Bureau data by the U.S. Business and Industry Council..
Toyota is one of thousands of companies shipping parts, along with finished vehicles, to the United States. The 7,000 Prius cars imported in February were more than double the monthly number a year earlier, the company said. .
Toyota has gradually shifted production of many of its other models to the United States and also the components that go into those cars. Still, roughly 25 percent of those components continue to be imported. As production rises in any given month, as it has lately for Toyota, so does the number of imported components..
Even when American companies make a product at home, their customers often prefer the imported version. The front-loading washing machine is a case in point. It has gained market share in the United States on a reputation for using less water and less energy than the traditional American machines that load clothing from the top and wash by agitating the clothes rather than spinning them..
Front-loaders are made in the United States by Maytag and Whirlpool, among others, but they are not a high priority..
By contrast, front-loaders are the most popular type of clothes washer in Germany, and appliance makers there, among them Siemens and Miele, are leading exporters of these machines..
To satisfy American demand, shipments from Germany have risen sevenfold since 1999, to $419 million in 2004, including a 122 percent increase last year..
While fashion and preference drive some imports, industrial integration on a global scale is the biggest single factor. American companies with operations abroad now account for nearly 48 percent of U.S. imports, the Commerce Department reports, up from an average of 45 percent in the 1990s..
Eaton, for example, makes truck transmissions in Brazil, often shipped to Ohio to be used in Navistar trucks. Ford Motor makes gasoline engines in Mexico for cars assembled in the industrial heartland of the United States..
Medtronic imports coronary stents and angioplasty balloons from its factory in Ireland, which in 2000 bought $3 billion more in medical devices from the United States than it sold to America. That $3 billion deficit has since turned into a $3 billion surplus. The devices from Ireland include U.S. components - for example, drugs used to coat stents to prevent clots from building up..
Indeed, the American-made content of a heart stent, a jet aircraft engine or any imported item might be 50 percent of its value or more..
But in the trade statistics, that distinction is not made; the entire value is listed as an import. That pattern is evident in personal computers, which generally rely on chips from Intel or Advanced Micro Devices for much of their value..
Fully assembled computers showed up as a $25 billion item in the 2004 import bill; the American contribution only showed up separately in export figures. China accounted for 55 percent of these shipments in January, up from just 9 percent in 2000, the Census Bureau reported..
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How long can this continue before the US economy implodes?