The President has trade deficits on his mind and wants to fight the whole world to lower the deficit. At one time, this was an acceptable thing to do, however in the 2000’s it is more complicated. A column by Adam Jourdan of Reuters focused on Apple. Apple is one of the most successful US companies – it is innovative, sells good products, has a very loyal customer base, changed music listening, brought back $200 billion in lower taxes from a gift by the President and the list could go on of the good things it does.

Apple designs iPhones in the US but produces them in China or the Far East. The latest phone is iPhone X a company called IHS Markit estimates its components cost $372.25. Of that $110 goes to Samsung Electronics in South Korea for supplying displays. Another $44.45 goes to Japan’s Toshiba and South Korea’s SK Hynix for memory chips. Other suppliers from Taiwan, the US, and Europe take their cuts. The phones are put together by Foxconn but that is only 3 to 6% of the cost of manufacturing.

Apple shipped 61 million iPhones to the US last year. Researchers and Counterpoint and IHS Markit show spending $258 on average to make iPhone 7 and 7 Plus. This means the iPhone 7 series added $15.7 billion to the trade deficit with China or about 4.4% of the total. That was 22% of the $70 billion in cell phones and household goods the US imported from China.

To only blame the Chinese is wrong. If you begin to add in stores such as Wal-mart and Dollar Stores where many of us have and continue to shop, trade deficits are a problem however solving them is equally a challenge. Any who watches Shark Tank will listen to the Sharks at some point say one of your high costs is manufacturing I have connections in China to lower than cost.

Linking to dividend paying stocks, companies take advantage of the existing supply chains, while politicians might make noises it is very difficult to change them without affecting the bottom line or profitability of the S&P 500.

There are more questions than answers, till the next time – to raising questions.