The U.S. trade deficit rose to $56.96 billion in April as a big jump in exports was swamped by record foreign oil prices and heavy American demand for imports.
The Commerce Department reported Friday that both exports and imports climbed to record levels. Imports rose 4.1 percent to $163.38 billion, led by a higher foreign oil bill.
Exports were up 3 percent to $106.42 billion, thanks to strong demand for American-made commercial aircraft, computer chips, industrial machinery and cars.
The April deficit, which was the fourth largest on record, was up a sharp 6.3 percent from a revised trade gap of $53.56 billion in March, which had been an improvement from February’s record $60.12 billion deficit.
So far this year, the trade deficit is running at an annual rate of $686 billion, 11 percent higher than the record $617.58 billion deficit set for all of 2004.
On Wall Street, the Dow Jones industrial average managed to gain 9.61 points Friday to close at 10,512.63.
The Bush administration insists that the soaring trade deficits reflect a faster-growing U.S. economy at a time when major trading partners in Europe and Japan are struggling with anemic growth that has cut into demand for American goods.
However, critics contend that the deficits are the result of failed administration free trade policies which have produced a string of record deficits and the loss of more than 3 million manufacturing jobs over the past five years.
Those attacks are coming at a time when the administration is struggling to round up enough votes in Congress to pass its latest free trade deal, the Central American Free Trade Agreement with six Latin American countries.
“This administration’s trade strategy — like the strategy of previous administrations — is to just pile on one bad trade deal after another,” said Sen. Byron Dorgan, D-N.D., who is leading the opposition to CAFTA. “How many more tens of thousands of American jobs do we have to see shipped overseas before we acknowledge that our trade policies are bankrupt and need fundamental change?”
In an effort to answer the critics, the administration has recently toughened its stance with China. It has re-imposed quotas on Chinese textile and clothing imports, increased pressure on China to overhaul its currency regime and sent Commerce Secretary Carlos Gutierrez to Beijing last week to complain that China is not doing enough to halt rampant piracy of American movies, music and computer programs.
For April, the deficit with China rose 14 percent to $14.7 billion. It is on track to exceed last year’s $162 billion deficit, the highest ever recorded with a single country.
This year’s increase with China has been propelled by a 51.7 percent rise in imports of textiles and clothing over the past four months, compared with the same period a year ago. This sharp increase has occurred with the lifting of a three-decade system of global quotas on Jan. 1.
American manufacturers have succeeded in getting the administration to re-impose quotas in several categories of clothing even though retailers contend they will drive up the price for American consumers.
The administration says China has taken all the preliminary steps needed to stop pegging its currency to the U.S. dollar, a practice that American manufacturers contend has undervalued the Chinese currency by as much as 40 percent, making Chinese goods cheaper in this country and American products more expensive in China.
But the Chinese contend they still must do more to prepare their financial markets and banking system for the volatility of a floating exchange rate. Bill Cheney, chief economist at John Hancock Financial Services, said he believes that when China does move, it will be only a modest change that will allow the yuan to rise in value by only a slight amount against the dollar.
“They aren’t about to take the risk of the political and economic instability that might result from a revaluation big enough to make a real dent in their export competitiveness,” Cheney said.
Nariman Behravesh, chief economist at Global Insight, said the rising trade deficit demonstrates showing that U.S. demand had rebounded after a brief slowdown in March. He said he was revising his estimate for overall economic growth to 3.5 percent for the current quarter, up from a previous forecast of 3.1 percent growth.
“This data suggest that the economy bounced back strongly from the soft patch of March,” he said.
U.S. petroleum imports rose by 4.3 percent in April to $19.4 billion, just below the all-time monthly high of $19.5 billion set in November. The average per-barrel price for crude oil did set a record at $44.76, reflecting the surge in global oil prices this spring.