He never explains why the USA buying more from a country than the country buys from the USA is an example of that country "ripping us off".
To me it sounds like that country is working for the USA. We the boss, they the worker.
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On a different note I think it would be interesting (and perhaps persuasive) to see trade impalances expressed as gross profits rather than sales.
For example, if we import a $1,000 notebook made in China with a gross margin of 18%, China gets $180 profit.
In order to make that notebook the Chinese company needs to buy a $50 Intel processor with a 50% gross margin, perhaps $80 of memory with a 40% gross margin, a $50 NVDA chip with a 60% gross margin, and $80 of Windows with a 90% gross margin. In just those four items China "imported" $260 of components and software with $159 of gross profit.
So the trade imbalance in sales is they imported $260 of stuff and then exported $1,000. Seems like a huge imbalance.
But the trade imbalance in gross profits is they paid $159 gross margin to US compenent companies and the US paid $180 of gross margin for the assembled notebook. It's about a wash. It's not something that needs dramatic realignment.
Profit is what matters. If China buys $50 of components from us, and $50 of components from Taiwan, and sells it to the USA for $100 and no Chinese profit, there's a US - China trade imbalance (they only bought $50 from the US and sold $100 to the US), but the US company is profitable and the Chinese company only breaks even. That's not a problem for us. |
