updated 9/10/2004 9:08:37 AM ET 2004-09-10T13:08:37

The U.S. trade deficit fell to $50.15 billion in July as American exports of cars, airplanes and computers rose while imports declined for the first time in nearly a year, reflecting a drop in the country's foreign oil bill. The politically sensitive deficit with China hit an all-time high.

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The Commerce Department reported Friday that the 8.9 percent improvement in the deficit in July followed a 16.9 percent surge in June which had pushed the trade gap to a record $55.02 billion. Nevertheless, the $50.15 red-ink figure was the second highest imbalance on record.

Even with the slight narrowing, the trade deficit through July is running at a record annual rate of $581 billion, putting the country on track to surpass last year's all-time high deficit of $496.5 billion.

The country's exploding trade deficit has become an issue in the presidential race with Democratic challenger John Kerry contending that President Bush has not done enough to protect American workers against unfair competition from low-wage nations with poor records on labor rights and environmental protection.

Kerry singles out China as the chief culprit in that regard. The new report showed that America's deficit with China hit a new monthly record of $14.9 billion, leaving the imbalance with China so far this year 28 percent above last year's level. The U.S. deficit with China hit $124.1 billion last year, the largest imbalance ever suffered with a single country.

Critics contend that the Bush administration has not done enough to force China to open up its markets to U.S. exports of manufactured goods and farm products or to pressure the Chinese to stop managing its currency in such a way that it gives Chinese products an estimated 40 percent price advantage over U.S. goods.

Copyright 2004 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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