Board of Governors of the Federal Reserve System

Figure 1. Direct and Indirect Imports of Intermediate Inputs

Decomposition of Gross Output

The left panel shows a diagram explaining that gross output can be decomposed into domestic intermediate inputs, imported intermediate inputs, and value added. The diagram then shows that domestic intermediate inputs can themselves be decomposed into domestic intermediate inputs, imported intermediate inputs, and value added. The diagram demonstrates that an industry’s output relies on imported inputs both directly and indirectly through the contribution of imported inputs to domestic inputs.

Import Share of Intermediate Inputs, Selected U.S. Sectors, 2019

The right panel shows the share of intermediate inputs that were imported, both directly and indirectly, in the manufacturing and services sector in 2019. The figure consists of two stacked bars, one for manufacturing and one for services, with the y-axis showing the percent of intermediate inputs attributable to direct and indirect imports. Just under 30% of intermediate inputs in the manufacturing sector are imported, and indirect imports account for about 10% of total intermediate inputs. In contrast, only about 10% of inputs in the services sector are imported, with direct and indirect imports contributing equally.

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Figure 2. Import Share of Intermediate Inputs. U.S. Manufacturing Industries, 2019

Figure 2 shows the share of intermediate inputs that were imported for industries in the manufacturing sector in 2019. The figure shows a horizontal bar for each of the 37 industries in the manufacturing sector, with the length of the bar representing the share of inputs that were imported. The share varies by industry – the top industry, pharmaceuticals, imports over 50% of inputs while food production imports less than 20%. The top 5 industries by import share of inputs are pharmaceuticals, aerospace, heavy trucks, automobiles, and light trucks, which all import over 30% of inputs. Three of the top five industries are in the motor vehicles sector. The bottom 5 industries are other mineral products, food, wood products, printing activities, and basic chemicals.

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Figure 3. Import Share of Intermediate Inputs by Region of Origin, Selected U.S. Manufacturing Industries, 2019

Figure 3 shows the import shares of intermediate inputs for the 10 industries in the manufacturing sector with the highest import share of intermediate inputs, broken down by region of input origin. The figure displays 10 horizontal stacked bars, each bar corresponding to an industry, with the color of the bar representing the share of imported inputs from one of seven regions: China, the Rest of Asia and Pacific, the Rest of the World, Europe, Mexico, Canada, and Japan. The colors are chosen to convey that sourcing from China and the Rest of Asia and Pacific represents a high level of geopolitical risk, while sourcing from Europe, Mexico, Canada, and Japan represent a low level of geopolitical risk. Sourcing of communications equipment is largely dominated by inputs from China and the Rest of Asia and Pacific, while sourcing in motor-vehicles industries is more diversified across regions. Pharmaceuticals sourcing is heavily concentrated in Europe.

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Figure 4. Intermediate Inputs by Type, U.S. Automobile Industry, 2019

Figure 4 shows a breakdown of intermediate inputs into the auto industry in 2019 by type. The figure shows 1 horizontal stacked bar, with colors representing the percent of total intermediate inputs attributable to each type. The figure considers 4 types of inputs: semiconductor inputs, other electronic inputs, motor-vehicle parts, and other inputs. The majority of intermediate inputs into the auto industry are motor vehicle parts or other inputs. Semiconductor inputs comprise only 5% of intermediate inputs into the auto industry.

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Figure 5. Selected Intermediate Input Types by Origin, U.S. Automobile Industry, 2019

Figure 5 shows three pie charts, with each pie chart showing the sourcing from each region for a given intermediate input in the auto industry. The colors in the pie chart represent the share of the given input coming from that region. The leftmost pie chart shows the regions of origin for semiconductor inputs, with the largest sources of imported semiconductors being China and the Rest of Asia and Pacific and comparatively little coming from Europe, Mexico, Canada, and Japan. The middle pie chart shows regions of origin for computer equipment. The majority of computer inputs are sourced from China and the Rest of Asia and Pacific, with only a small portion sourced domestically and from Europe, Mexico, Canada, and Japan. The rightmost pie chart shows regions of origin for motor-vehicle parts, and shows that only a small portion of motor-vehicle parts are sourced from China and the Rest of Asia and Pacific while a large portion are sourced domestically and from Europe, Mexico, Canada, and Japan.

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Figure 6. Distribution of Sourcing-Risk Index and Subcomponents across Industry-Input Pairs, 2019

Supplier-Concentration Risk

The top left panel is a histogram showing the distribution of Herfindahl-Hirschman index values across industry-input pairs in the manufacturing sector. The figure shows that the distribution of HHI values is skewed to the right for all inputs, with a fat right tail that thins gradually starting at HHI values above 0.5. The graph also shows that the distributions for other chemicals, printing activities, and agricultural inputs are significantly to the right of the distribution for all inputs, reflecting the greater domestic sourcing of these inputs.

Geopolitical Risk

The top right panel is a histogram showing the distribution of geopolitical risk index values across industry-input pairs in the manufacturing sector. The figure shows that the distribution is tightly concentrated around a modal value near -1, with a thin right tail composed of industry-input pairs with high geopolitical risk. The figure also shows the distributions of industry-input pairs involving electrical equipment and electronic inputs, and these distribution are significantly to the right of the distribution of all inputs and account for most of the right tail of the distribution.

Import Share

The bottom left panel is a histogram showing the distribution of import share values across industry-input pairs in the manufacturing sector. The figure shows that the distribution of import shares is roughly symmetric, with industry-input pairs involving electrical equipment, motor vehicle parts and non-mining machinery, and electronic inputs representing much of the right end of the distribution.

Sourcing-Risk Index

The bottom right panel is a histogram showing the distribution of the sourcing risk index constructed from the three previously mentioned components. The distribution for all industries is skewed to the right, suggesting most industries source inputs relatively safely. The right tail is accounted for by industry-input pairs involving inputs of electronics and electrical equipment.

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Figure 7. Industry Sourcing Tail Risk

Contribution of Risk Factors The left panel is a horizontal stacked bar chart showing the contribution of each risk factor to the overall risk index of the ten manufacturing industries with the highest sourcing tail risk. The top ten industries are, in order, furniture, apparel, beverages, light trucks, computer equipment, textiles, aerospace, automobiles, printing activities, and other transportation equipment. The largest contributor to the risk index for all industries is geopolitical risks, followed by import share and concentration risks. Contribution of Selected Inputs The right panel is a horizontal stacked bar chart showing the contribution of specific inputs to the sourcing risk index for the ten riskiest industries. Semiconductor inputs, other electronic inputs, electrical equipment, and apparel and furniture are the inputs which contribute the most to the risk index with semiconductors contributing heavily to the risk index for light trucks and automobiles. The aerospace industry also shows risk driven by semiconductors and electronic inputs, while the furniture and apparel industries are mostly driven by riskily sourced inputs of furniture and apparel itself.

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