Do Apple's iPhones add to the US trade deficit with China?

Add to, or subtract from?  That is a two-billion dollar question, isn't it?  This WSJ report says:

The value-added approach, in fact, shows that sales of the iPhone are adding to the U.S. economy—rather than subtracting from it, as the traditional approach would imply.
Based on U.S. sales of 11.3 million iPhones in 2009, the researchers estimate Chinese iPhone exports at $2.02 billion. After deducting $121.5 million in Chinese imports for parts produced by U.S. firms such as chip maker Broadcom Corp., they arrive at the figure of the $1.9 billion Chinese trade surplus—and U.S. trade deficit—in iPhones.
If China was credited with producing only its portion of the value of an iPhone, its exports to the U.S. for the same amount of iPhones would be a U.S. trade surplus of $48.1 million, after accounting for the parts U.S. firms contribute.

 

 

 Am sure trade economists will duke it out on this one.  But, it does seem like we might have to redefine how to measure trade data and deficits and surpluses

 

 

How do you solve a problem like .... China?

More on Sino-American tensions

In politics, small issues can gather momentum all of a sudden while the larger issues continue to be neglected.  Remember the Terry Schiavo bill and the Congress?  I mean, Bush had to give up his Crawford vacation time in order to get to DC only to address this!

It will awful if the Chinese currency issue vaults to the top of the political agenda.  More on this, in addition to my earlier note, from the Economist:

The basic economic analysis—that a stronger yuan, on a trade-weighted basis, is necessary to rebalance China’s economy away from exports—is surely right. But the world’s immediate problem is a dramatic shortfall in demand across the globe and that will not be righted by exchange-rate shifts. Currency movements switch demand between countries; they do not create it. In the short-term, therefore, the outlook for the world economy depends on whether governments’ stimulus packages are successful and, right now, team Obama would do better to focus on the scale, nature and speed of Beijing’s stimulus measures than rant about the currency. What’s more, the evidence for currency manipulation is weakening. Although China still runs a huge current-account surplus, it is no longer accumulating foreign-exchange reserves at a rapid clip, as capital is flowing out of the country.

More important, the political calculus could easily misfire. Domestically, Mr Geithner’s comments may simply fan congressional flames for tougher action on China. Lindsey Graham, a senator who first pushed for a 27.5% tariff against China in 2005, called the comments “music to my ears”. 

Music to Sen. Graham's ears will not get us out of this global economic crisis.  Yes, this will/should be a part of the longer-term global economic restructuring. As much as the ag subsidies, ethanol subsidies, gas tax, social security, and everything else ought to be discussed.  But, just as we are not discussing overhauling social secturity right now, we ought to stay away from the "currency manipulation" angle for now.