US trade deficit reaches record US$68.5b
Updated: 2006-03-10 08:43
Rising oil prices and Americans' seemingly insatiable appetite for foreign goods — from Chinese clothing to French wine and Japanese cars — sent the US trade deficit to another record.
The Commerce Department reported Thursday that the deficit jumped to $68.5 billion in January, 5.3 percent more than in December. Analysts had expected the trade gap to worsen, given the surge in world oil prices, but the increase caught them by surprise.
"We shopped the world's markets until we dropped," said Joel Naroff, chief economist at Naroff Economic Advisors. "We bought a lot more of everything, including capital and consumer goods, foods and motor vehicles."
Analysts said that unless demand for imported goods slows, the US could produce a record annual deficit for the fifth year in a row, topping last year's imbalance of $723.6 billion.
Critics contended the January deficit showed the failure of US President Bush's free trade policy that has contributed to the loss of nearly 3 million US manufacturing jobs.
"The American people need a Congress and an administration that will get tough on trade policy to rein in these runaway deficits," said Rep. Benjamin Cardin of Maryland, the top Democrat on the House Ways and Means subcommittee on trade.
The Clinton administration filed on average 11 unfair trade cases per year before the World Trade Organization, he said, while the Bush administration has filed only 13 cases in more than five years in office.
On Wall Street, the Dow Jones industrial average dropped 33.46 points to close at 10,972.28 on Thursday.
The overall deficit in January surpassed the record of $67.8 billion set in October.
US exports of goods and services rose 2.5 percent to an all-time high of $114.4 billion. But this increase was swamped by a 3.5 percent rise in imports, which also set a record at $182.9 billion.
US exports of industrial supplies, capital goods and autos all set records in January as American producers benefited from a rebound in economic growth in Europe and Japan.
Japan on Thursday dropped its five-year policy of keeping interest rates at rock-bottom levels. The move was seen as dramatic evidence that Japan finally has defeated the deflationary pressures that had severely depressed growth.
The rise in imports to the US reflected a 4.3 percent increase in America's foreign oil bill. It climbed to $24.6 billion as an increase in crude oil prices to $51.93 per barrel offset a drop in the volume of shipments in January.
Imports of foreign cars and auto parts rose by 5.6 percent to $22.7 billion. Imports of foreign food products rose by 6.2 percent to $6.4 billion, reflecting increased demand for imported wine and other foods.
Some analysts worried about the sizable and widespread increases in imports of manufactured goods and what that might be saying about America's competitive standing.
"The January trends spotlight the continued decline of national competitiveness in industries of the future such as high-tech," said Alan Tonelson, a research fellow with the US Business and Industry Council, a manufacturing trade group.
America's deficit with Canada, its largest trading partner, jumped 11.1 percent, to a record $8.9 billion. The deficit with Mexico was up 8.8 percent, to $4.6 billion. The deficit with the 25-nation European Union declined by 3.8 percent, to $9.7 billion.
America's deficit with India shot up by 61.3 percent in January to $1.26 billion. Seeking to address growing anxiety about the loss of service sector jobs to India, Bush said on a visit to that country last week that the answer was not new protectionist barriers but better education to train Americans for 21st century jobs.
The administration has continued to pursue free trade agreements as a way of lowering barriers to US exports, announcing this week that it will soon start talks with Malaysia.