The Apple iPhone shows in which Trump will be misreading trade deficits

President Donald Trump’s threat to impose steep tariffs on Chinese exports to the U.S. would likely probably inflict a lot more harm on American consumers than This particular would likely on China.

To see why, you have to understand how Trump’s policy apparently misreads the reasons the U.S. runs a trade deficit from the first place.

“Last year, we lost $500 billion on trade with China,” Trump said, erroneously, at a March 23 news conference. “We can’t let in which happen.”

To begin with, Trump’s math will be off — by more than $100 billion.

A trade deficit occurs when the value of imports will be greater than the value of exports, in terms of both goods as well as also services.

Last year, the U.S. imported roughly $505 billion of Chinese goods as well as also shipped about $130 billion back, a difference of around $375 billion.

as well as also Chinese-made products like his Apple iPhone, for example, represent a big part of in which deficit, even though many of its most valuable parts come coming from some other trading partners.

Some $70 billion of the U.S. trade deficit with China will be coming from shipments of cellphones. although in which $70 billion will be not an accurate measure of the value China added to the cellphones This particular shipped to the U.S.

in which’s because the accounting used from the “official” trade statistics hasn’t kept up with the growth of global supply chains, which source parts as well as also raw materials coming from multiple countries to make just one product.

“About two-thirds of world trade today will be involved in value chains in which cross borders during the production process,” said David Dollar, a senior fellow at the John L. Thornton China Center, in a blog post.

Each country in which adds a link from the chain also adds a little value to the final product. although those intermediate contributions are rolled up into the final export value in which tallied when the product reaches its final destination. As a result, much of in which $70 billion U.S.-China cellphone trade deficit actually comes coming from some other U.S. trade partners, such as South Korea, Japan as well as also Singapore.

To better understand why in which happens, all Trump has to do will be take a closer look at his iPhone the next time he tweets.

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