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