America’s trade deficit improved slightly in June as record sales of U.S. farm products and other exports blunted the impact of soaring crude oil prices.
The deficit for June dipped 0.3 percent to $64.8 billion, which was still the fifth largest deficit on record. The imbalance in May was revised to $64.97 billion, $1.1 billion higher than the initial estimate a month ago as late data showed bigger shipments of oil and consumer goods than originally reported .
Through the first half of this year, the deficit is running at an annual rate of $768 billion, putting it on track to surpass last year’s record of $716.7 billion. Democrats hope to use the worsening trade deficit to attack Bush administration trade policies and argue that a tougher approach is needed, particularly with countries such as China.
In other news, the number of newly laid off workers filing claims for unemployment benefits rose by 7,000 last week to 319,000, a bigger gain than economists had been expecting.
The deterioration in the deficit this year is largely a result of soaring global oil prices, reflecting increased tensions in the Middle East and higher demand from developing countries such as China.
For June, the average price for a barrel of imported crude oil hit an all-time high of $62.04, pushing total crude oil imports to a record high of $20.5 billion. All petroleum imports, reflecting crude and refined products, totaled $27.3 billion, the second highest level on record after May’s $28.3 billion.
America’s foreign oil bill is expected to rise even more in coming months, reflecting the fact that crude oil has been trading above $75 per barrel in recent days as markets respond to the deteriorating security situation in Iraq and the outbreak of fighting in Lebanon.
For June, the smaller deficit reflected the fact that U.S. exports rose a solid 2 percent to total a record $120.7 billion, a manifestation of record sales of American farm products and strong gains in other areas.
Imports also rose to a record of $185.5 billion, an increase of 1.2 percent, as shipments of consumer goods set a record and auto imports climbed to the second highest level on record.
The politically sensitive deficit with China increased by 11.9 percent in June to $19.7 billion as U.S. exports to China fell by 4.3 percent while imports of Chinese products into the United States rose by 8.1 percent. The import gains were led by big increases in clothing and computers.
So far this year, the deficit with China is running 13 percent above the pace set last year, when the imbalance hit $202 billion, the highest ever recorded with a single country.
That soaring deficit has raised complaints in Congress where key lawmakers are pushing a bill that would impose 27.5 percent tariffs on all Chinese products coming into the United States unless the country moves more quickly to allow its currency to rise in value against the dollar.
American manufacturers contend that the Chinese yuan is undervalued by as much as 40 percent, giving the country a trade advantage by making Chinese goods cheaper in comparison to U.S. products. Treasury Secretary Henry Paulson has pledged to keep pressing the Chinese to revalue their currency but so far Chinese officials contend that they must go slowly to avoid disrupting their economy.
U.S. exports with many parts of the word have been rising in recent months as American companies are benefiting from a pickup in global economic growth.
U.S. exports to the 25-nation European Union and to South America and Central America set all-time highs in June while exports to Japan climbed to the highest level since March 2001.