Import penetration into the manufacturing sector

Import penetration in the US manufacturing sector is forecast to reach 33.5% in 2025, rising by 4.7% as tariff concerns have prompted widespread frontloading strategies aiming to minimize exposure to future trade costs. This strategy, along with removing the de minimis rule, has fueled an expansion in import volumes, giving imports a larger share of domestic manufacturing demand before new tariffs are applied. The increase in import penetration reflects companies' short-term efforts to circumvent expected tariff hikes and a surge in lower-priced imports ahead of more stringent duties, resulting in a marked rise for the year.

From 2020 to 2025, the pace of growth in import penetration in the manufacturing sector grew at a CAGR of 1.3% over the period, contrasting with previous decades of robust increases. This period was marked by volatility in global trade relations, with US tariffs restraining growth. Import penetration, which measures the proportion of domestic manufacturing demand supplied by foreign producers, was pressured downward by policies from 2018 that continued to resonate. Imports from China, once the dominant exporter due to low labor costs and advanced infrastructure, fell to a 15% share by 2023. In response, Mexico increased exports to the US, surpassing China as the top source of imported goods. However, these shifts did not lead to a surge in import penetration, as tariffs and retaliatory measures constrained volumes.

Macroeconomic trends such as exchange rate movements and changes in domestic manufacturing capacity influenced import penetration. The appreciation of the US dollar supported higher import penetration by reducing imported goods' costs, partially offsetting protectionist measures. Technological advancements abroad enabled competitiveness despite trade barriers. Labor costs and the shift toward higher-value US trade products also shaped import trends. By 2025, the combined effect of tariffs, currency appreciation, and shifting supply sources led to a slowly rising but constrained import penetration rate.