The iPhone Production Chain And International Trade Statistics

This article estimates the value added for the components that are assembled in China to produce the iPhone.    Only a small percent of the value added to the iPhone is in the assembly process that occurs in China.  On the other hand, the total value of the iPhone that is shipped from China to consumers in the US, is counted as part of the US trade deficit with China. One implication is that revaluing the Chinese currency upwards versus the dollar, would have little impact on the US trade deficit with China. Another implication, is that Ricardo's theory of comparative advantage, which is based upon bilateral trade between two countries, is inconsistent with the nature of the global production chains that are characteristic of  consumer electronic products like the iPhone.  The majority of trade today is in intermediate components that are used in the assembly of final products purchased by consumers.  The components are sourced from all over the world.  The comparative advantage of the US is in the design and marketing of the iPhone.