> Let’s think about some examples. Suppose an American buys a TV made in China for $1000. Remember that GDP can be calculated as the sum of consumption, investm

> Let’s think about some examples. Suppose an American buys a TV made in China for $1000. Remember that GDP can be calculated as the sum of consumption, investment, government purchases, and net exports: > GDP = Consumption + Investment + Government Purchases + Net Exports > When the American buys the $1000 TV from China, U.S. consumption goes up by $1000. And U.S. net exports go down by $1000, since “net exports” means exports minus imports. The increase in consumption exactly cancels out the fall in net exports. So the total contribution of the imported TV to U.S. GDP is zero. This is not how buying a TV works, at least not if you buy through normal retail channels. You pay the store $1000 and you get a TV that the store bought for around $500. If it came from a US company that outsourced manufacturing to China, the US company keeps $250 and sends $250 to China. The store pays salaries and rent. The brand pays salaries and rent and R&D and such. GDP increases by at least $750, plus a bunch because a lot of those salaries turn into consumer spending. And this applies to sales abroad, too. When someone in France buys a CPU or GPU or iPhone, the physical product may never touch US soil, but most of the purchase price ends up in the US, and that contributes to the GDP and to the economy in general. A country could do just fine, sustainably, by designing products, paying foreign countries to manufacture them, collecting profits, and spending some of those profits to buy foreign-made goods. No physical goods are ever exported, the trade-in-services numbers may or may not be nonzero, the trade-in-goods balance will be enormously negative, and this is fine.