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Pierre Lemieux yet again does great service by explaining why the accounting identity GDP=C+I+G+X-M does not mean that imports (M) reduce GDP. A slice:

One of the formulas for calculating GDP says (in a simplified form) that GDP = expenditures by residents + exports – imports. These last two terms may look like “net exports” but this is just a statistical artefact. Imports are subtracted in the formula for the only reason that that are inadvertently captured in the estimate the statisticians obtain for the expenditures by residents, and have to be removed because GDP is domestic production. This does not mean that imports are deducted from GDP, but that they are not part of it.

Speaking of the potential to be misled by accounting artifacts, Jason Dedrick, Greg Linden, and Kenneth L. Kramer set the record straight about the actual value of Americans’ imports from the Chinese. A slice:

So what about all of those famous factories in China with millions of workers making iPhones? The companies that own those factories, including Foxconn, are all based in Taiwan. Of the factory-cost estimate of $237.45 from IHS Markit at the time the iPhone 7 was released in late 2016, we calculate that all that’s earned in China is about $8.46, or 3.6 percent of the total. That includes a battery supplied by a Chinese company and the labor used for assembly.

The other $228.99 goes elsewhere. The U.S. and Japan each take a roughly $68 cut, Taiwan gets about $48, and a little under $17 goes to South Korea. And we estimate that about $283 of gross profit from the retail price – about $649 for a 32GB model when the phone debuted – goes straight to Apple’s coffers.

In short, China gets a lot of (low-paid) jobs, while the profits flow to other countries.

Mark Perry has more on how Trump’s tariffs take Americans to the cleaners.

My intrepid Mercatus Center colleague Veronique de Rugy is correct: Trump should not act as an arms dealer for the Saudis.

Baylen Linnekin explains another ill-consequence of Trump’s protectionism scarcityism: it’s causing an artificial rise in the prices that we Americans pay for food.

John D. McGinnis praises international trade for paving the path not only to greater prosperity but also to peace.

Greg Mankiw pleads with journalists to exercise more care when reporting on the trade deficit.


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