Trade Deficit Between PRC and America

Date:  2021-03-13 10:15:32
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The trade between America has been of significant benefit to the US for an extended period until China started the production of iPhone. Economically a country the export high-tech goods is in a better position to compete in the world market as compared to the country that produces inferior products (Xing & Neal 45). The high-tech commodities earn high revenue to the state as compared to the inferior goods. It became tough to trade with a country that exports high-tech goods to the partner who produce inferior products. The inferior products are sold at a lower price as compared to the high-tech commodities hence, could not manage the trade balance value (Feldstein 28). The affected country, therefore, has to face a trade definite before it could change the pattern of production. Export and import are the key issue in a trade that every country has to consider before they could get into a trade deal. America is an industrialized country that should remain at the top of the world market with the most technical goods being exported. Apple is one of the largest technical companies in the United States of America that leads in the production of high-tech products like the mobile phones and the computers (Xing & Neal 45). The peoples republic of china is a developing country that has been on the highest trend in economic development.

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iPhone is a type of a phone that involves the combination of various applications that are made from different countries such as Chorea, Japan, China, and the United States of America. The Peoples Republic of China got involved in the production market just in the year 2009 when it emerged as an assembling industry for the iPhone (Xing & Neal 45). The invention of the iPhone took place in the United States of America where most of the big industries are found. The apple industry designed the phone and invented the iPhone but never major on its production (Feldstein 28). It is expected that America produces goods that are of the same quality as the PRC to enable the two nations to have to have a balanced trade. The balanced trade would do away with the industry definite that exists between the two countries. The exports should be in the position to pay for the imports for trade balance to exist. The point that America imports more expensive goods to a great quantity from China leads to trade deficit since their export could not pay for the import. The country had to spend more revenue from other sources. America would now be trading on the deficit budget due to the excess payment for the import.

The American economy is better the People Republic of China and could do better. It has greater potential due the numerous resources within its boundary. China has put its much effort in the production of technical goods that it imports the raw materials from the industrial countries and does the assembling to make a more refined product than what it import (Xing & Neal 45). The value of the finished goods becomes higher as compared to the unfinished good due to the quality that has been added to them. The Chinese iPhone become very expensive that it requires the America to use more of their income to purchase the goods. China has been aggressive and does not need to use their natural resources to produce high-tech goods but use technics to import more inferior goods and convert them to a more refined product and sell back to their exporters (Feldstein 28). iPhone is used by almost every country globally making China have control of the world market share of the high-tech phones.

The trade involves importation and exportation of goods and services from one country to other countries. For a country to be in a safer position in the world business market it has to balance between its import and export. When the level of import is higher than export, the country is most likely to face trade deficit (Feldstein 28). In the situation between America and the PRC, America had to face trade deficit since iPhone is a high-tech good that sells higher than the American technical products like most of the Apple gadgets. America has the largest number of consumers of the iPhone than China, and the rate of importation of the iPhone is higher (Xing & Neal 45). PRC just consume very little of their product and gain more revenue from the exportation of the iPhone. America ended up using much of its revenue importing the technical phone from China, a country that just does the assembling of the phone. When they pay more for the foreign goods, they end up using more of the countrys income to settle the payment of the expensive goods.

Due to the high American population, the People Republic of China has the highest opportunity to expand more of their export that would match the population demand. As the demand for the iPhone increase in America, there would be a continuous importation of the inferior goods from America that Chinese use to make the iPhone (Feldstein 28). The action caused by the increase in the demand for the American raw materials would encourage the exportation of the by the Americans aiding the exportation of inferior goods and wait to import the superior goods from China.

From the text, it would be more economical for the America to produce iPhone using their most industrious company (Apple) to produce the iPhone (Xing & Neal 45). It would reduce the gap of trade created by the technical machine (Feldstein 28). The gap could widen more and more if the country does not react to the gap at the early stage of the production since PRC might advance more. If America could take the action to produce the iPhone using their highly rated company (Apple) it could increase the country's income and be able to trade with the People the Republic of China. Apple has the ability to produce high-quality phone as a substitute to the iPhone by the Chinese. Apple would have the advantage of being the sole producer of the material used by the China Company to produce iPhone. It would also be an advantage for the Apple Company to compete in the world market since the cost of production would be low due to the cheaply available raw materials.

In summary, trade imbalance between America and the People Republic of China is due to the laxity in the industrialized countries to have control of the market. China is just a developing nation that could not be compared to the United States of America (Xing & Neal 45). For trade balance to exist, the two countries that are involved in the business have to struggle to balance their imports with export (Feldstein 28). Developing countries have become more aggressive and could take the control of the global market.

Work Cited

Feldstein, Martin. "Resolving the Global Imbalance: The Dollar and the US Saving Rate (Digest Summary)." Journal of Economic Perspectives 22.3 (2008): 113-125.

Xing, Yuqing Xing Yuqing, and Neal Detert Neal Detert. "How iPhone Widens the US Trade Deficits with PRC How iPhone Widens the US Trade Deficits with PRC." (2010).

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