Authors: Mary Amiti and Donald R. Davis

In a sharp departure from earlier trends, the price of U.S. imports from China rose 6 percent in the 2006-08 period. To explore the forces behind this surprising increase, the authors create a new import index that uses highly disaggregated data to track price developments in different product types. The index reveals that the largest price increases were concentrated in industrial supplies—goods that rely heavily on commodity inputs. The authors conclude that the surge in commodity prices through mid-2008 was the primary driver of the rising import prices from China.