Import penetration into the manufacturing sector

Import penetration in the US manufacturing sector is estimated at 33.3% in 2026, down from 2025, as domestic production operates below full capacity and absorbs fewer imported inputs than it could under stronger operating conditions. This slack limits manufacturers' willingness and ability to increase import use, even as global supply conditions stabilize, and these challenges are expected to persist through 2026, with higher tariffs keeping foreign competitors on a more level footing but also contributing to weaker export growth and uneven domestic demand. Rising prices tied to tariffs are constraining consumption, so manufacturers face less pressure to expand output and must reassess how much production capacity they truly need in this reshaped demand environment.

?From 2021 to 2026, the pace of growth in import penetration in the manufacturing sector grew at a CAGR of 0.4% 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.