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How the iPhone Widens the United States Trade Deficit with the People's Republic of China


  • Xing, Yuqing

    (Asian Development Bank Institute)

  • Detert, Neal

    (Asian Development Bank Institute)


In this paper, the authors use the iPhone as a case to show that even high-tech products invented by United States (US) companies will not increase US exports, but on the contrary exacerbate the US trade deficit. The iPhone contributed US$1.8 billion to the US trade deficit with the People’s Republic of China (PRC). Unprecedented globalization, well organized global production networks, repaid development of cross-country production fragmentation, and low transportation costs all contributed to rational firms such as Apple making business decisions that contributed directly to the US trade deficit reduction. Global production networks and highly specialized production processes apparently reverse trade patterns: developing countries such as the PRC export high-tech goods—like the iPhone—while industrialized countries such as the US import the high-tech goods they themselves invented. In addition, conventional trade statistics greatly inflate bilateral trade deficits between a country used as export-platform by multinational firms and its destination countries.

Suggested Citation

  • Xing, Yuqing & Detert, Neal, 2010. "How the iPhone Widens the United States Trade Deficit with the People's Republic of China," ADBI Working Papers 257, Asian Development Bank Institute.
  • Handle: RePEc:ris:adbiwp:0257

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    References listed on IDEAS

    1. repec:fip:fedgsq:y:2005:i:mar10 is not listed on IDEAS
    2. Hali J. Edison & Michael W. Klein & Luca Antonio Ricci & Torsten Sløk, 2004. "Capital Account Liberalization and Economic Performance: Survey and Synthesis," IMF Staff Papers, Palgrave Macmillan, vol. 51(2), pages 1-2.
    3. Andreas Hauskrecht & Nhan Le, 2005. "Capital Account Liberalization for a Small, Open Economy," Working Papers 2005-13, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
    4. Abdul Abiad & Enrica Detragiache & Thierry Tressel, 2010. "A New Database of Financial Reforms," IMF Staff Papers, Palgrave Macmillan, vol. 57(2), pages 281-302, June.
    5. C. Randall Henning, 2002. "East Asian Financial Cooperation," Peterson Institute Press: Policy Analyses in International Economics, Peterson Institute for International Economics, number pa68, October.
    6. Ben S. Bernanke, 2005. "The global saving glut and the U.S. current account deficit," Speech 77, Board of Governors of the Federal Reserve System (U.S.).
    7. Christian B. Mulder & Phil De Imus & L. Effie Psalida & Jeanne Gobat & R. B. Johnston & Mangal Goswami & Francisco F. Vazquez, 2009. "Addressing Information Gaps," IMF Staff Position Notes 2009/06, International Monetary Fund.
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    More about this item


    sino-us trade; apple iphone; world trade patterns;

    JEL classification:

    • F10 - International Economics - - Trade - - - General

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