Using Value-Added Trade Estimates, We Have a +$32.25B Trade SURPLUS with China for 2011

According to research at the San Francisco Federal Reserve, 36% of the value of imported goods goes to U.S. companies and workers, and for Chinese imports it's much higher: the U.S. content of “Made in China” is close to 55%.  Reason? The SF Fed explains:

"The fact that the U.S. content of Chinese goods is much higher than for imports as a whole is mainly due to higher retail and wholesale margins on consumer electronics and clothing than on most other goods and services." 

The iPhones imported from China help illustrate this - of the $600 retail price of an iPhone that is imported and "assembled in China," more than 60% goes directly to Apple and other American companies. From a CD post about this:

"A new reasearch paper calculates that because of the way trade statistics are calculated - the full value of an iPhone is considered an export to the U.S. from China by both countries, even though only about 1% of the value was created during the final assembly process in China -  just the iPhone alone added almost $2 billion to America's trade deficit with China in 2009. The authors find that if a "value-added approach" was used to calculate trade statistics, the iPhone would have instead generated a $48 million trade surplus for the U.S. in 2009, instead of the $1.9 billion trade deficit reported using the conventional methodology."

Using the percentages provided by the S.F. Federal Reserve, we can re-estimate our current trade position with China as follows:

According to the BEA, we currently have a $133 billion trade deficit with China for 2011, based on imports of $183 billion and exports of about $50 billion.  But of the $183 billion of Chinese imports, about 55%, or $100.65 billion, represents the contributions of U.S. content that goes to American companies and workers.  The balance of $82.4 billion would represent the value-added by China to its exports to the U.S.

On the other hand, we have to account for the Chinese content (or "value-added") of U.S. exports, which we could estimate at 36% using the S.F. Fed estimate for U.S. imports (and it's possible that this could be high for the Chinese-contribution of our exports to China).  In that case, the U.S. value-added for exports to China would be 64% of $50 billion, or $32 billion, and the Chinese content would be $18 billion. 

Summing up, we would have $100.65 billion in U.S. value-added for the "Made in China" imports, and $32 billion in U.S. content, or value-added, for our exports to China, for a total U.S. value-added of $132.65 billion for 2011. 

For China, it would have $82.4 billion in value-added to its exports to the U.S. (our imports) and it would get credit for $18 billion of Chinese-content in the total of $50 billion worth of  "Made in the U.S.A." products it purchased this year.  The total value-added for China would be $100.4 billion.   

Bottom Line: Using the San Francisco Federal Reserve estimates of the foreign and domestic content of imports, we would have a $32.25 billion "value-added" trade surplus with China for 2011 ($132.65 billion - $100.4 billion), instead of the officially reported trade deficit of -$133 billion.