With a market cap above $300 billion, there’s no doubt that Apple is a glistening example of what’s right with corporate America. If more companies were like it, the economy would be healthier.And yet, Apple is a big contributor to the US trade deficit with China.
It’s a point that Andy Kessler made back in 2004 with regard to the iPod. It alone accounted for a $1.5 billion trade deficit with China, and yet the iPod’s existence (at the time) was seen as having added $16 billion in market cap to the company.
Today the WSJ is again revisiting the same point, breaking down the maths even further. While an iPhone costs about $180 wholesale, the value coming from China — just the final assembly — is about $6.50 per unit. And yet the entire cost of the iPhone gets counted in the trade deficit with China. As a consequence, the iPhone alone added $2 billion to the US’ trade deficit with China.
Again, nobody would think the trade isn’t worth it, and nobody would suggest that on-net isn’t good for the US economy.
It’s not to say that there aren’t issues with currency manipulation out of Beijing, or that US manufacturing can’t be more competitive. But if you think the trade deficit inherently represents some huge problem, then you need to dive further into the statistics.
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