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How the iPhone Widens the US Trade Deficit with China: the Case of the iPhone X

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  • Yuqing Xing

    (National Graduate Institute for Policy Studies, Tokyo, Japan)

Abstract

Through an examination of the case of the iPhone X, this paper demonstrates that Chinese companies involved in production of the iPhone X have moved up the value chain. According to the bill of materials, those companies contributed 25% of the value added of the iPhone X. About 45% of the value added of the iPhone X originated from Japan, Korean and other economies. The iPhone trade remains a significant element of the statistics distortion of the Sino-US bilateral trade imbalance. In terms of gross value, the import of one iPhone X results in a $332.75 trade deficit for the US; measured in terms of value added, the deficit is a mere $104. Depreciation of the yuan has very limited power to counterbalance the tariffs imposed by the Trump administration because foreign value added embedded in Chinese exports is 33.9% on average. Simulation results show that to counterbalance a 25% tariff, the yuan would have to depreciate by 43.3% against the US dollar on average; and to fully compensate for a 25% tariff burden on the iPhone X, a 400% depreciation of the yuan would be necessary. Hedging the risk of the punitive US tariffs by depreciation of the yuan is mission impossible.

Suggested Citation

  • Yuqing Xing, 2019. "How the iPhone Widens the US Trade Deficit with China: the Case of the iPhone X," GRIPS Discussion Papers 19-21, National Graduate Institute for Policy Studies.
    • Handle: RePEc:ngi:dpaper:19-21
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    1. Weekend reading links
      by noreply@blogger.com (Urbanomics) in Urbanomics on 2023-10-22 04:36:00

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    Cited by:

    1. Yuning Gao & Bo Meng & Gabriele Suder & Jiabai Ye & Yongping Sun, . "Making global value chains visible: Transnational corporations versus domestically owned firms," UNCTAD Transnational Corporations Journal, United Nations Conference on Trade and Development.
    2. Bohn, Timon & Brakman, Steven & Dietzenbacher, Erik, 2021. "From exports to value added to income: Accounting for bilateral income transfers," Journal of International Economics, Elsevier, vol. 131(C).
    3. Ben Shepherd, 2022. "Modelling global value chains: From trade costs to policy impacts," The World Economy, Wiley Blackwell, vol. 45(8), pages 2478-2509, August.
    4. Meng, Bo & Ye, Ming, 2022. "Smile curves in global value chains: Foreign- vs. domestic-owned firms; the U.S. vs. China," Structural Change and Economic Dynamics, Elsevier, vol. 60(C), pages 15-29.
    5. Xuan Nguyen & Yuqing Xing, 2022. "Exporting independently or entering the global market as a contract manufacturer?," GRIPS Discussion Papers 22-04, National Graduate Institute for Policy Studies.

    More about this item

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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