People still don’t seem to appreciate that official trade figures...
Glenn@GlennLuk
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Apr 06, 2025
~3 min read
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People still don’t seem to appreciate that official trade figures don’t include the U.S.’ largest “exports” to the world, which is intangible brand/IP/tech that flows via MNCs and aren’t captured in cross-border trade data because the physical products are often produced abroad.
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The large goods trade deficit is balanced out by services surplus and by profits generated overseas by U.S. MNCs that result in both repatriated FDI income as well as earnings power that supports stock repurchases and rising valuations.
Econovis@econovisuals
📈 U.S. Global Trade Balance in 2024
In 2024, the U.S. goods trade deficit totaled $1.2 trillion. The deficit with China stood at $295 billion, accounting for 24.6% of the total. Trade deficits with North American partners—Mexico ($172 billion) and Canada ($63 billion)—combined for 19.6% of the total. The deficit with the European Union reached $236 billion, also representing 19.6% of the overall shortfall.
#USA #trade #export #import #goods #merchandise #NAFTA #EU #Canada #Mexico #China #Germany #Japan
In 2024, the U.S. goods trade deficit totaled $1.2 trillion. The deficit with China stood at $295 billion, accounting for 24.6% of the total. Trade deficits with North American partners—Mexico ($172 billion) and Canada ($63 billion)—combined for 19.6% of the total. The deficit with the European Union reached $236 billion, also representing 19.6% of the overall shortfall.
#USA #trade #export #import #goods #merchandise #NAFTA #EU #Canada #Mexico #China #Germany #Japan
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This value often flows back via the capital account on the BoP, as FDI income itself tends to get parked in tax havens like Ireland.
Glenn@GlennLuk
Instead, Apple China repatriates most of the funds to a tax haven like Ireland.
This shows up as a bilateral transfer of FDI income from China to Ireland.
readwriteinvest.com/p/why-does-the…
This shows up as a bilateral transfer of FDI income from China to Ireland.
readwriteinvest.com/p/why-does-the…
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When Apple sells a $1,200 iPhone to a Chinese consumer, those funds eventually find their way to mainly American beneficiaries.
They support jobs in Cupertino, dividend payouts to mostly American shareholders, etc.
They support jobs in Cupertino, dividend payouts to mostly American shareholders, etc.
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But if we just look at the trade balance, the iPhone trade actually contributes to the bilateral trade deficit!
This is why we cannot just rely on the trade balance data. By excluding services and FDI income and even capital income, we end up ignoring major offsetting categories of modern trade and making key policy decisions based on an incomplete picture.
This is why we cannot just rely on the trade balance data. By excluding services and FDI income and even capital income, we end up ignoring major offsetting categories of modern trade and making key policy decisions based on an incomplete picture.
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The folks that focus only on the physical goods trade balance — to the point of even pedantically claiming that FDI income “isn’t trade” — IMO do a great disservice to this country by propagating a distorted view of modern trade reality.
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Focusing only on the physical trade deficit amplifies this notion that somehow America is the victim here.
All while ignoring the massive earnings power of dominant American MNCs that generate the cross-border flows that ultimately enable households to import so many consumer goods in the first place.
All while ignoring the massive earnings power of dominant American MNCs that generate the cross-border flows that ultimately enable households to import so many consumer goods in the first place.
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Now with the whole “reciprocal tariff calculation”, we see how this distortion actually has meaningful real-world impact in driving insane policy that is going to negatively impact billions of lives, including Americans.
Those tariffs were calculated off only the trade balance, ignoring large offsetting contributions by U.S. MNCs.
Those tariffs were calculated off only the trade balance, ignoring large offsetting contributions by U.S. MNCs.
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What this is going to very naturally lead to is general retaliation against U.S. MNCs, which have been the key source of income used to support and fund the consumption that drives the large trade deficit.
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This is going to hurt, in ways that aren’t visible if you just examine the trade balance.
One single $1,200 iPhone sold to a Chinese buyer drives more economic value-add to the American economy than the manufacturing DVA from producing 50 sneakers.
One single $1,200 iPhone sold to a Chinese buyer drives more economic value-add to the American economy than the manufacturing DVA from producing 50 sneakers.
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Would we rather do the design work on the iPhone in comfortable air-conditioned offices in Cupertino and sit on a fat tollbooth collecting App Store revenue or put in the work required to manufacture >50 sneakers?
We are effectively trying to reverse what has been a very lopsided trade. This is insane.
We are effectively trying to reverse what has been a very lopsided trade. This is insane.
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China is going to step into this gap.
Countries impacted by the trade war will turn to China.
It can now offer comparable tech and other advanced products — smartphones, appliances, electric vehicles — that can substitute leading American brands.
Countries impacted by the trade war will turn to China.
It can now offer comparable tech and other advanced products — smartphones, appliances, electric vehicles — that can substitute leading American brands.
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It will offer encourage outbound FDI to fill the gap.
It will help move more labor-intensive industries like footwear and apparel to these countries and shift demand.
The trade shifts from the developing world buying American brands and tech in exchange for their labor to buying Chinese tech in exchange for its labor.
This is such a dumb trade for Americans.
It will help move more labor-intensive industries like footwear and apparel to these countries and shift demand.
The trade shifts from the developing world buying American brands and tech in exchange for their labor to buying Chinese tech in exchange for its labor.
This is such a dumb trade for Americans.
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Chinese soft power will flow via hardware distribution.
Vietnamese buying Xiaomi phones will probably have Chinese-designed apps and AI pre-installed.
Indonesians buying Chinese EVs will use Chinese voice bots.
Vietnamese buying Xiaomi phones will probably have Chinese-designed apps and AI pre-installed.
Indonesians buying Chinese EVs will use Chinese voice bots.
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Recent events are accelerating the pace.
I’m not optimistic the U.S. comes out of this ahead, as MNCs like Apple have been the key driver of prosperity.
We are now indirectly killing the Golden Goose with this latest round of insane trade policy that only serves to further isolate the American economy.
I’m not optimistic the U.S. comes out of this ahead, as MNCs like Apple have been the key driver of prosperity.
We are now indirectly killing the Golden Goose with this latest round of insane trade policy that only serves to further isolate the American economy.