I'm not a trade expert, but I can spot one clear omission missing from the trade deficit discussion: the value-added. Chinese exports to the US have significan

I'm not a trade expert, but I can spot one clear omission missing from the trade deficit discussion: the value-added. Chinese exports to the US have significantly lower value-added than the US exports to China. US exports have high value added, over 80% for exports to China. Chinese exports to US have much lower value added, something like 30-40%. Role of third countries in bilateral trading relationships is important. Extreme case is Chinese made iPhone that leaves very little value-added to China, they just join expensive parts from Taiwan, Japan, South Korea and US together with robots or cheap labor. China exports more to the US, but less of the value stays in China. If you calculate the trade balance using value added trade US-China trade deficit is $200 billion for combined goods and services. >0.7 percent of U.S. GDP depends on Chinese consumption of American-made goods and services, while 3.1 percent of China’s GDP is derived from U.S. demand. So, in any tariff battle, China would likely suffer more. https://www.bloomberg.com/view/articles/2018-07-19/china-s-economy-is-different-no-recessions-in-a-quarter-century https://www.bloomberg.com/view/articles/2018-07-19/china-s-e... Both countries get hurt, but both countries will survive trade war agaisnt each other. But US is not in trade war path only with China. They go against EU, Canada, Mexico and others. Every front trade war would be worse but survivable. The real question is why. Everyone survives trade war but everybody also loses. > And simple trade models, while they do say that trade wars are bad, don’t say that they’re catastrophic. >To do this right, we should use one of those computable general equilibrium models I mentioned above. These suggest substantial but not huge losses – 2 or 3 percent of GDP. https://www.nytimes.com/2018/06/17/opinion/thinking-about-a-trade-war-very-wonkish.html https://www.nytimes.com/2018/06/17/opinion/thinking-about-a-...