iPod = Trade Deficit Contributor

The NY Times provides a classic example of how our trade deficit with China can be artificially inflated:

The retail value of the 30-gigabyte video iPod that the authors examined was $299. The most expensive component in it was the hard drive, which was manufactured by Toshiba and costs about $73. The next most costly components were the display module (about $20), the video/multimedia processor chip ($8) and the controller chip ($5). They estimated that the final assembly, done in China, cost only about $4 a unit.

Although only $4 per unit can actually be attributed to China, each 30-gigabyte video iPod contributes $150 in exports for China. This illustrates why the trade deficit can be artificially inflated.

Source: An iPod Has Global Value, NY Times.