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130 views • March 21, 2018

How Apple’s iPhone skews US trade deficit

Seamus Light
It's something Donald Trump regularly tweets about from his iPhone. “Trade deficits, trade deficits, trade deficits.” At least $500 billion. A potential trade war is brewing between the US and China, due to a sharp trade imbalance, mainly in tech. But the Apple iPhone is actually a great example of why the US-China trade deficit may be overblown. The iPhone is US designed and owned, but manufactured in China. The US imported over $70 billion worth of cellphones from the country last year, but in reality, that number isn't accurate. These parts come from all over the world. China is the manufacturing hub for lot of the world's electronics. When those phones are finally shipped out of China, they don't necessarily reflect the value of where that phone has come from. They put a high number in the exports from China and a big surplus in the US imports. The display modules comes from Samsung in South Korea, the memory chips come from Japan's Toshiba, and the chipsets are from America's own Qualcomm. Finally, it's assembled in China by contract manufacturers like Foxconn.   That's only a small fraction of the overall pie, usually around 3 to 6% of the manufacturing cost. But the full amount of $400 per iPhone gets slapped onto China's export tally. China, for its part, reported its 2017 trade surplus with the US as 276 billion - just over a quarter less than the US figure. But those numbers seem to mean little to Trump, who may be unveiling new tariffs for China this week.
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