In our global economy, the goods we purchase can come from anywhere, including local manufacturers and foreign countries. Americans buy a diverse mix of domestic and foreign goods. Each type of purchase has its own set of economic implications. There are several reasons Americans purchase large quantities of foreign goods.
The term "foreign goods" generally refers to products that are assembled, completed or manufactured entirely in another country. Some foreign goods are made abroad by U.S. companies. Some use American-made components, which are added to foreign-sourced components and assembled in a foreign country. In some cases, foreign companies have factories in the United States; defining these goods is more difficult, because they are built by U.S. workers. But with all foreign goods, at least some of the money we pay for them goes to a foreign worker or a foreign company.
Americans buy some foreign goods because they cost less than comparable American-made goods. This price difference is largely due to the lower cost of labor in other countries. With lower wages, more business-friendly corporate tax policies, government subsidies and less regulation, manufacturers in foreign countries can produce goods for less than it would cost U.S. companies to produce them, even after the cost of shipping to the United States. American consumers who want to save money often end up buying foreign goods.
Americans sometimes buy foreign goods because they perceive them as being of higher quality than similar U.S. products. For example, Swiss watches have a reputation for quality and prestige. For some people the same is true of Italian sports cars and Japanese electronics. Immigrants might prefer to imports from their native countries because they're familiar with them.
Lack of Alternatives
In some sectors, U.S. consumers have few domestic choices because the vast majority of manufacturing is done abroad. One example is the personal computer industry, which is dominated by Asian manufacturers. Even when these companies work for American corporations as subcontractors, supplying only manufacturing and assembly services, the products are classified as foreign. In the typical electronics retailer in the United States, very few, if any, American-made computers are available.
- Stewart Sutton/Lifesize/Getty Images