How The iPhone Figures In The U.S.-China Trade Gap The Apple iPhone is an iconic American product, invented, designed and sold by a California company. But when trade figures are tallied, the iPhone is counted as a Chinese import. That means every iPhone sold here makes the U.S. trade deficit with China grow.
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How The iPhone Figures In The U.S.-China Trade Gap

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How The iPhone Figures In The U.S.-China Trade Gap

How The iPhone Figures In The U.S.-China Trade Gap

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MELISSA BLOCK, Host:

This is ALL THINGS CONSIDERED from NPR News. I'm Melissa Block.

ROBERT SIEGEL, Host:

But as NPR's Wendy Kaufman reports, the numbers don't tell the whole story.

WENDY KAUFMAN: For help, we turn to Glenn Fleishman, a technology writer for the economist.com and other publications.

GLENN FLEISHMAN: This is an iPhone 4. This is made of dozens or hundreds of components in it - some large, some small.

KAUFMAN: Those components are made in the U.S., South Korea, Japan and many other places, but they are assembled into an iPhone in a factory in China.

FLEISHMAN: Just on the back of the main logic board, there's a chip from Samsung. It's got the memory. There's a Cirrus Logic audio codec. There's a Texas Instruments touch-screen controller, which...

KAUFMAN: Mark Doms, the chief economist at the Commerce Department, acknowledges this approach has limitations but says there really isn't any other way to do it.

MARK DOMS: There's just really no practical way to ask companies to break out the value of the goods by country of origin for all the individual components. That just isn't very feasible.

KAUFMAN: So the total wholesale value of the iPhone - for the 3G, it was about $180 - goes on the Chinese import side of the trade ledger. As a result, says Rob Feenstra, an economist at the University of California, Davis, the...

ROB FEENSTRA: U.S. trade deficit with China tends to be exaggerated.

KAUFMAN: In a much-talked-about paper, Chinese economist Yuqing Xing took a stab at the figure.

YUQING XING: If you look at the manufacturing costs, China contribution is $6.50.

KAUFMAN: That $6.50 is the estimated cost of the actual assembly. He says if you use that figure, not the entire wholesale amount, the U.S. trade deficit with China would be about $2 billion less.

XING: Yes, yes. Actually, yeah, that's the bottom line.

KAUFMAN: Some economists dispute his figures, but there's little doubt that the real trade deficit with China is less than the number that shows up in the headlines.

KAUFMAN: Still, Department of Commerce economist Mark Doms says...

DOMS: Even if we think about the iPhone and whatnot, the overall pattern of the increase in trade deficit with China won't be changed by these types of issues.

KAUFMAN: Wendy Kaufman, NPR News.

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