OUR TRADE SURPLUS WITH CHINA

Most people believe Trump when he says China is the culprit in the vast trade deficit America faces.  With boatloads of Chinese-made goods coming this way, and empty ships going the other way, he has argued, we run a huge trade deficit.  This effectively exported U.S. jobs to China while we are importing goods from there.

That flies in the face of the facts.  If you believe Donald Trump, a man who has lied his way through life, it is because you did not do your due diligence and research the facts yourself.

If you run a small business, if you shop at Target, Wal-Mart, then you are buying predominately Chinese goods.

For many of us, we either could not buy the products we need to run a business or live in our homes.

America has been importing from China lots of Apple iPhones, Dell computers, Gap shirts, Hasbro toys, Mattel dolls and Nike shoes. The list can go very long. Careful eyes may immediately spot that those are all American companies. In fact, a San Francisco Federal Reserve study has found that 55% of the value of American imported goods from China actually goes to American companies and workers. In comparison, American companies and workers only capture 36% of the value added of the import from all countries combined. Buying from China gives America a much better deal than buying from other countries in the world.

Let’s look at Apple’s iPhone as an example. In 2009, iPhones contributed about $2 billion, equivalent to 0.8% of the Sino-U.S. bilateral trade deficit. One iPhone 3GS was sold for about $600. These phones were exclusively manufactured by Foxconn, a factory in a Southern Chinese city called Shenzhen. To produce them, Foxconn had to import $10.75 worth of parts from American companies. The rest of its $172.46 components came from Korea, Japan, Germany, and elsewhere. Out of a $600 iPhone, how much does China get? A puny $6.50, or 1% of the value.  Most of that $2 billion is, in fact, value captured by Apple and other American companies. China makes it possible for those companies to reward their shareholders handsomely and to provide thousands of high paying jobs in America.  Yet our politicians, though they likely also use Chinese made Apple iPhones, blame China for stealing American jobs.

According to the Bureau of Economic Analysis, America imported $375 billion of goods and services from China in 2010 and exported $115 billion to China. The Sino-U.S. bilateral trade deficit is $260 billion, more than 50% of America’s total of that year. But if we calculate based on value-added contribution by the two countries, using the San Francisco Federal Reserve study, America actually has a trade surplus of $70 billion.

Using trade policies such as the trade bill recently passed in Senate to punish China for alleged currency manipulation actually penalizes companies like Apple, Dell, Gap, Hasbro, Mattel, Nike, and others. It penalizes not only poor American families trying to make ends meet by relying on inexpensive Chinese products, but also thousands of high-paid American workers who work for those companies.

Trump, Congress, right wing think tanks have their own agenda and it certainly does not rely on the acts.

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