The trade deficit is rising again after two months of declines, pushed by oil prices and a flood of imports from China. Analysts warned that global oil prices above $70 per barrel will swell the deficit more in coming months.
The Commerce Department reported Friday that the gap between what the United States sells abroad and what it imports rose to $63.4 billion in April, 2.5 percent higher than the March imbalance of $61.9 billion.
The trade deficit fell in both February and March after hitting an all-time high of $66.2 billion in January.
While economists noted that the April deficit was smaller than the $65 billion that had been expected, it was still the sixth largest imbalance on record. They said deficits in comings months were likely to be worse given the jump in global crude oil prices.
The April deterioration in the deficit came from a $1.44 billion increase in America’s foreign oil bill, which rose to $23.8 billion. That reflected a big jump in crude oil prices which overwhelmed a drop in volume. Oil traded on Friday at $71.45 per barrel in New York, up $1.10 from the previous day. Oil hit an all-time high of $75.17 in late April.
Through the first four months of this year, the trade deficit is running 12.9 percent above the same period a year go, putting the country on track to run up a record trade deficit for a fifth straight year. Last year’s deficit was $716.7 billion.
Critics of the administration’s trade policies seized on the new imbalance as further evidence that President Bush’s strategy of striking free-trade deals with countries around the world was not working and was contributing to a loss of nearly 3 million manufacturing jobs since Bush took office.
“These figures are a jarring reminder that our nation needs a new approach to its trade policy,” said Rep. Benjamin Cardin of Maryland, the top Democrat on the Ways and Means trade subcommittee.
Sen. Byron Dorgan, D-N.D., said that the new deficit figure highlighted the “total failure of U.S. trade policy” and showed that the country was handing over $2 billion a day to foreigners to cover the trade gap.
But new U.S. Trade Representative Susan Schwab said the country’s trade picture was “much less dire” than critics were contending. She noted that the overall economy is performing strongly at present with unemployment dropping to 4.6 percent in May, the lowest jobless rate in nearly five years.
The increase in the April trade deficit reflected a 0.7 percent rise in imports, which climbed to $179.1 billion, the second highest level on record.
In addition to a higher oil bill, imports of autos and auto parts were up and shipments of consumer goods from China of such items as furniture, televisions, video recorders and toys all rose.
That helped to push America’s total deficit with China to $17 billion in April, up a hefty 9.4 percent from March. That was likely to add to pressure in Congress to force China to revalue its currency as a way of helping narrow the deficit.
American manufacturers contend China’s currency is undervalued by as much as 40 percent, making Chinese goods cheaper for U.S. consumers and American products more expensive in China.
Some analysts said that Treasury Secretary nominee Henry Paulson will likely face tough questioning on the administration’s approach to China during his upcoming Senate confirmation hearings.
U.S. exports of goods and services slipped 0.2 percent to $115.7 billion, just slightly below the all-time high set in October, reflecting a big $310 million drop in commercial aircraft shipments and smaller declines in sales of farm products and consumer goods.
The deficit from last year was revised down from an earlier estimate of $723.6 billion, reflecting annual benchmark revisions that increased America’s surplus in services based on more complete data.
Analysts believe the deficit will set another record this year, although they also think the pace of deterioration is slowing after huge increases in recent years.
The deficit with Japan rose by 2.8 percent in April to $7.8 billion. The deficit with Canada rose by 16.3 percent to $6.1 billion in April while the imbalance with Mexico fell by 9.3 percent to $4.9 billion.
America’s deficit with the 25-nation European Union declined by 7.2 percent in April to $9.4 billion.