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Surging oil prices widen US trade gap as China deficit narrows
By Veronica Smith
AFP
WASHINGTON
Petroleumworld.com 05 11 07The US trade deficit jumped to a six-month high of 63.9 billion dollars in March as rising oil import prices more than offset stronger exports to China, the Commerce Department reported Thursday.
The March trade gap sharply exceeded analyst forecasts of 60 billion dollars, raising fresh concerns about the gap's drag on the US economy. It was the widest since September 2006 and rose from 57.9 billion in February.
The politically sensitive US trade gap with China narrowed by 6.4 percent to 17.2 billion dollars, compared with 18.4 billion in February.Exports to China in March hit a new record high of 5.5 billion dollars. Imports from the Asian powerhouse were at their lowest level since May 2006, at 22.7 billion.
China, by far the heavyweight in the US trade deficit, is under fire from US officials, industry and labor unions who accuse Beijing of keeping its currency, the yuan, artificially low to make exports unfairly competitive.
Senator Charles Schumer, chairman of the Joint Economic Committee, called on President George W. Bush's administration to seriously tackle the trade unbalance and get tough on China.
" This administration needs to clamp down on high deficits and in particular force China to play fairly when it comes to currency valuation and free access to economic markets," the New York Democrat said.
However, US Treasury Secretary Henry Paulson said that long-term structural imbalances were the biggest driver of the large deficit with China.
" Most of their growth is driven by exports and there's not a big enough domestic consumption portion to their growth," Paulson told CBNC television.
Analysts estimated the March data would cost half a point in first-quarter economic growth.
Marie-Pierre Ripert, economist at IXIS Corporate and Investment Bank, said first-quarter gross domestic product growth "is likely to be revised significantly downward" to 0.8 percent from the tepid 1.3 percent officially estimated last month.
Peter Morici, a University of Maryland economist, pointed out that the monthly trade gap had shot up 140 percent since December 2001.
" Each dollar spent on imports, not matched by a dollar of exports, shifts workers into activities where productivity is lower and reduces domestic demand and employment," he said.
The trade shortfall grew 10.4 percent from the previous month, the sharpest monthly change in the trade picture since September 2005.
In March, imports surged 4.5 percent to 190.1 billion dollars, their highest level since August 2006. Exports increased 1.8 percent to 126.2 billion, the highest point since January.
Rising oil prices helped tip the trade balance of the world's biggest energy consumer.
Import volume in March included a 2.03-billion-dollar rise in crude oil imports, mainly due to a rise in the price, to 53 dollars per barrel in March from 50.71 dollars in February.
The volume of imported oil shot up to 324 million barrels, from 253 million in February.
The National Association of Manufacturers pointed to "encouraging nuggets" in the report, saying the rise in the deficit was due to higher oil prices but that manufacturing exports were up 10 percent from a year earlier.
" The realigning dollar, which fell by 17 percent since early 2002, along with solid economic growth in most areas of the world, are together creating favorable trade winds for manufacturers," said David Huether, the NAMs chief economist.
Auto imports also widened the gap, rising 909 billion dollars in March.
The deficit with the European Union climbed to 7.717 billion dollars in March amid record exports to the EU, at 23.1 billion, and record imports, at 30.8 billion. Imports from France jumped a whopping 86 percent to 1.4 billion.
The gap also grew with North American Free Trade Agreement partners: with Canada, by 21.7 percent to 5.7 billion dollars, and with Mexico, by 32.1 percent to 6.7 billion.
AFP 10 1927 GMT 05 07
Copyright© 2007 AFP. All Rights Reserved.
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