US-China trade war reality: The missing $158 billion
Federal Reserve research shows Americans are buying more Chinese goods than reported, and proposed tariff expansions could lead to significant price hikes in retail.
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Published March 02, 2025
Data Snapshot #
U.S. imports from China have fallen by much less than official American data suggests, while proposed tariffs on Chinese goods and other countries could significantly raise U.S. consumer prices, according to Federal Reserve studies published this week.
The dual research papers from the Federal Reserve Banks of New York and Atlanta provide a sobering assessment of the economic impact of escalating trade barriers, as both countries consider new rounds of tariffs on each other’s goods.
The $158 billion ‘import gap’ with China #
According to the New York Fed, a significant “import gap” has emerged since 2018 between U.S. reports of imports from China and China’s reports of exports to the U.S. This discrepancy amounted to approximately $158 billion in 2024, suggesting the U.S. is importing far more Chinese goods than officially reported.
“U.S. imports from China have decreased by much less than has been reported in official U.S. statistics,” writes Hunter L. Clark, economic policy advisor at the Federal Reserve Bank of New York. While U.S. data shows China’s share of imports fell from 21.6% in 2018 to 13.4% in 2024, China’s own data indicates a much smaller decline of only 2.5 percentage points.
How ‘de minimis’ shipments hide true trade figures #
This disparity is partly attributed to the surge in direct-to-consumer shipments from China under the “de minimis” exemption, which allows imports valued under $800 to enter duty-free with minimal documentation. These shipments, estimated to exceed $50 billion annually, are largely unrecorded in official U.S. import statistics.
Consumer price impact of proposed tariff scenarios #
Meanwhile, researchers at the Federal Reserve Bank of Atlanta project significant consumer price increases under various tariff scenarios. Their analysis found that an additional 10% tariff on Chinese imports, coupled with 25% tariffs on Canadian and Mexican imports and 10% on other countries, would raise prices on everyday retail purchases by 0.81% to 1.63%, depending on pass-through rates.
“Notably, tariffs on Canada and Mexico contribute approximately 45% of the total price effect,” states the Atlanta Fed report, highlighting how the broadened scope of current tariff proposals extends well beyond the 2018-19 U.S.-China trade tensions.
The studies also reveal a significant shift in trade patterns since the first trade war. Between 2018 and 2023, American firms have reduced their reliance on Chinese imports by approximately 11%, not due to changing consumer preferences, but primarily through supply chain restructuring.
For retailers, including those in the luxury sector, these findings present significant challenges. The Atlanta Fed notes that while tariffs themselves may not trigger long-lasting inflation, they create “an immediate, one-time upward shift in price levels that persists.”
Implications for luxury brands #
Given these findings, luxury brands and retailers should review supply chains to identify vulnerabilities to tariffs across all sourcing countries, not just China. They should also analyze pricing strategies to determine optimal pass-through rates that balance profitability and market share and explore alternative shipping methods to potentially utilize the de minimis exemption where appropriate, though this approach may face regulatory changes.
As trade tensions escalate, the direct and indirect effects of tariffs are set to significantly reshape consumer markets and global supply chains.
The Jing Daily Data Snapshot analyzes the latest data on China’s luxury and lifestyle markets.
