Trade deficit increases even though oil imports drop

The Commerce Department reported Thursday that the trade deficit rose by 5.7 percent in February to $62.3 billion, the highest level since November. Analysts had forecast that the deficit would decline, believing that a severe economic slowdown in the United States would cut demand for imports.

However, imports of goods and services shot up 3.1 percent to an all-time high of $213.7 billion, reflecting a big surge in imports of foreign cars. Exports also set a record, rising by 2 percent to $151.4 billion, reflecting strong gains in the sale of American-made heavy machinery, computers and farm goods.

The rise in the trade deficit gives ammunition to critics who contend the Bush administration’s policies have helped lose more than 3 million manufacturing jobs since January 2001, as the trade deficit set records for five consecutive years.

Trade is shaping up as a key issue in the upcoming presidential campaign and in the fight for control of Congress. Republicans contend that free trade is boosting U.S. export opportunities, while Democrats contend that Republicans have not done enough to protect American workers from unfair foreign competition.

Bush sent Congress a free trade agreement with Colombia on Monday, using authority which would require Congress to act on the measure within the next 90 legislative days. But House Speaker Nancy Pelosi was set to get the House to vote to suspend the fast-track process, contending that the Colombia deal cannot be approved until lawmakers are satisfied that the country has done enough to halt violence against union organizers.

For the first two months of this year, the trade deficit is running at an annual rate of $727.6 billion, up from last year’s deficit of $708.5 billion, which had been the first decline in the deficit after five consecutive annual records.

Analysts, who believe the country has fallen into a recession, expect the trade deficit will decline again this year as slumping demand in this country cuts into imports while a weak dollar against other currencies boosts sales of American products overseas.

For April, the politically sensitive deficit with China dropped by 9.6 percent to $18.4 billion, the lowest imbalance in a year. The improvement reflected big declines in imports of computers, cellphones and other telecommunications equipment, and clothing. Even with the decline, the U.S. deficit with China remained the largest with any country. The next highest deficit was an imbalance of $6.9 billion with Japan.

The deficit with Saudi Arabia totaled $3.5 billion, while the imbalance with all OPEC nations totaled $13.2 billion.

Trade deficit
Biggest U.S. trade deficits in April:
‘ China ‘ $18.4B’ Japan ‘ $6.9B
‘ Saudi Arabia ‘ $3.5B