US trade deficit widens sharply to $46.3 billion
Trade deficit widens sharply to $46.3 billion in August as gap with China hits all-time high
The U.S. trade deficit widened sharply in August, reflecting a surge in imports of consumer products as businesses restocked their shelves in hopes of a pickup in consumer demand.
The politically sensitive deficit with China climbed to an all-time high, a development that was certain to increase pressure on the Obama administration to take a tougher line on trade issues including China’s tightly controlled currency.
The Commerce Department said Thursday the deficit in August increased 8.8 percent to $46.3 billion. Exports edged up a slight 0.2 percent but this increase was swamped by a 2.1 percent jump in imports.
So far this year, the trade deficit is running at an annual rate of $502.5 billion, up 34 percent from the $374.9 billion deficit for all of 2009, which had been the smallest imbalance since 2003.
Last year’s deficit was just half the total of the previous year and reflected the country’s deep recession, which cut sharply into demand for imports. Economists had expected the deficit to rise this year but had forecast that a rebounding global economy would also boost demand for exports.
In the April-to-June quarter, the surge in imports swamped the rise in exports. Trade was the biggest drag on the economy during the spring, subtracting 3.5 percentage points from growth. As a result, the overall economy, as measured by the gross domestic product, grew at just 1.7 percent in the second quarter, down from growth of 3.7 percent in the first three months of the year.
Economists believe trade will be less of a drag on GDP in the July-September quarter, but Jennifer Lee, an analyst with BMO Capital Markets, said that the bigger-than-expected widening of the August deficit would ensure that GDP growth for the third quarter will remain at an anemic pace below 2 percent.
For August, the 0.2 percent rise in exports pushed them to $153.9 billion, the highest level in two years. The small gain reflected increases in U.S. sales abroad of farm goods, autos, computers and oil-field drilling equipment. Those gains offset big declines in sales of commercial aircraft, industrial engines and ship engines.
The 2.1 percent rise in imports pushed them to $200.2 billion and reflected a big jump in demand for foreign food products, which climbed to an all-time high of $7.8 billion. Imports of petroleum products rose 3.5 percent to $27.6 billion, the highest level since April, as the average price of a barrel of imported crude oil rose to $73.47, up from $72.09 in July. That was the highest price since May.
Imports of capital goods rose to $38.6 billion, the highest level in more than two years, with big increases in demand for foreign-made semiconductors, generators and other types of industrial machinery.
The deficit with China rose 8.2 percent to an all-time high of $28 billion, surpassing the old record of $27.9 billion set in October 2008. So far this year, the U.S. deficit with China, the largest imbalance with any country, is running 20.6 percent above the pace set in 2009.
At a time of high U.S. unemployment, the widening trade deficit with China has increased calls for a crackdown on what critics see as China’s unfair trade practices, such as keeping China’s currency undervalued to make Chinese goods more competitive against American products.
The Obama administration has been stepping up pressure on China to accelerate the appreciation of its currency and last month the U.S. House passed legislation that would impose stiff trade sanctions on countries such as China found to be manipulating their currencies to gain trade advantages.
“The rising trade deficit with China is a disturbing trend,” said Scott Paul, executive director of the Alliance for American Manufacturing. “It should be crystal clear that jawboning alone won’t reduce our trade deficit and the loss of jobs. America’s workers and manufacturers need action.”
The administration is facing a deadline of Friday for releasing its twice-a-year report to Congress on whether any countries are manipulating their currencies to gain trade advantages.
The administration has so far refused to designate China as a manipulator, arguing that such a designation would only trigger negotiations between the two nations on the currency issue, something that is already occurring.
However, given the administration’s tougher rhetoric in recent weeks on China’s failure to move fast enough to allow its currency to appreciate, U.S. manufacturing groups are hopeful that the new report will name China as a currency manipulator.
In August, America’s deficit with Canada, the country’s largest trading partner, jumped 53.1 percent to $2.2 billion; the deficit with the European Union narrowed 17.8 percent to $8.1 billion, and the deficit with Japan rose 17.8 percent to $5.8 billion, the highest level since October 2008.
America ran a record $1.3 billion surplus with Brazil as U.S. exports to that country climbed to $3.4 billion, the highest on record.
Source: AP News
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