The iPhone’s Trade Deficit Problem

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Pundits love to claim that America’s job market will come roaring back as soon as everyone learns to “embrace the innovation economy” and churn out more high-tech gadgets. Well, maybe they should think different. Two academic researchers at the Asian Development Bank Institute in Tokyo recently found that the most iconic American gadget of all—Apple’s iPhone—last year added $1.9 billion to the US trade deficit.

The explanation is fairly simple: iPhone parts manufactured in the United States account for a mere 6 percent of its estimated $179 wholesale cost.  The rest of the iPhone’s cost comes from components made in Japan and Germany and their final assembly in China. “High-tech products such as iPhones in this context do not help increase US exports,” conclude the researchers, Yuqing Xing and Neal Detert, “but instead contribute to the US trade deficit.”

As the chart makes obvious, it’s unfair to blame the entire trade deficit on China, which accounts for just 3.6 percent of the phone’s wholesale cost. Citing some of the figures yesterday, the Wall Street Journal argued that “the practice of assuming every product shipped from one country is entirely produced in that country no longer reflects the complex reality of global commerce.” That’s certainly true.

Yet the Journal neglected a more important point: There’s nothing forcing Apple to manufacture the iPhone abroad. The ADBI researchers estimate that Apple’s gross profit margin on iPhones in 2009 was a whopping 64 percent. This leads them to conclude that “profit maximization behavior,” and not competition, is what’s driving Apple to China. In other words, Apple would rather make a little bit more money than employ more Americans.

If all iPhones were assembled in the US, it would have added $5.7 billion to US exports last year. When are we gonna get an app for that

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WHO DOESN’T LOVE A POSITIVE STORY—OR TWO?

“Great journalism really does make a difference in this world: it can even save kids.”

That’s what a civil rights lawyer wrote to Julia Lurie, the day after her major investigation into a psychiatric hospital chain that uses foster children as “cash cows” published, letting her know he was using her findings that same day in a hearing to keep a child out of one of the facilities we investigated.

That’s awesome. As is the fact that Julia, who spent a full year reporting this challenging story, promptly heard from a Senate committee that will use her work in their own investigation of Universal Health Services. There’s no doubt her revelations will continue to have a big impact in the months and years to come.

Like another story about Mother Jones’ real-world impact.

This one, a multiyear investigation, published in 2021, exposed conditions in sugar work camps in the Dominican Republic owned by Central Romana—the conglomerate behind brands like C&H and Domino, whose product ends up in our Hershey bars and other sweets. A year ago, the Biden administration banned sugar imports from Central Romana. And just recently, we learned of a previously undisclosed investigation from the Department of Homeland Security, looking into working conditions at Central Romana. How big of a deal is this?

“This could be the first time a corporation would be held criminally liable for forced labor in their own supply chains,” according to a retired special agent we talked to.

Wow.

And it is only because Mother Jones is funded primarily by donations from readers that we can mount ambitious, yearlong—or more—investigations like these two stories that are making waves.

About that: It’s unfathomably hard in the news business right now, and we came up about $28,000 short during our recent fall fundraising campaign. We simply have to make that up soon to avoid falling further behind than can be made up for, or needing to somehow trim $1 million from our budget, like happened last year.

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