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US Trade Deficit Thread 2007

 
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The US trade deficit narrowed slightly in January as exports rose to an all-time high while imports dropped. The Commerce Department reported that the gap between what America sells abroad and what it imports fell to $59.1 billion in January, down by 3.8 percent from a December deficit of $61.5 billion.

The improvement came despite the fact that the politically sensitive deficit with China shot up by 12 percent to $21.3 billion, a development certain to increase pressure on the administration to deal with what critics see as China's unfair trade practices.

Exports of goods and services rose by 1.1 percent to an all-time high of $126.7 billion in January, reflecting gains in sales of American airplanes, computers and farm products such as soybeans and wheat.

Imports declined a slight 0.5 percent to $185.8 billion. Shipments of foreign cars, clothing, televisions and toys and games all were down. These declines offset a 5.4 percent increase in America's foreign oil bill, which rose 5.4 percent to $24.5 billion in January.

The trade deficit has set records for five straight years, reaching $765.3 billion in 2006 with one-third of that amount accounted for by the imbalance with China, which jumped to $232.5 billion last year, the largest trade gap ever recorded with a single country.

Those rising trade deficits have come as America has lost 3 million manufacturing jobs since
President Bush took office in January 2001, losses that critics blame in part on the soaring trade deficits.

For January, the jump in the deficit with China reflected big increases in imports of Chinese-made computers, clothing and cell phones.

The drop in the January deficit raised hopes that the trade imbalance will finally start to improve this year. Analysts believe that stronger growth overseas and past declines in the value of the dollar against many currencies will boost U.S. exports while slower growth in the United States will trim the appetite for foreign goods.

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Barry
Mr. Do It All


Mar 9, 2007, 7:02 PM

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Re: [Barry] US Trade Deficit Thread 2007 [In reply to] Can't Post
The US Commerce Department reported that the imbalance in the current account jumped by 8.2 percent to $856.7 billion, representing a record 6.5 percent of the total economy. It marked the fifth straight year the current account deficit set a record.

Investment flows turned negative by $7.3 billion from a surplus of $11.3 billion in 2005. It was the first time investment income has been negative on records going back to 1929. That means foreigners earned more on their U.S. holdings than Americans earned on their overseas investments.

Until last year it had still been able to record a surplus in investments. Analysts said that figure turned negative because of the large amount of U.S. assets that have been transferred to foreign hands over the past three decades to pay for the imported cars, clothing and electronic goods American consumers love to buy.

A rapid withdrawal could cause the value of the dollar against other currencies, as well as U.S. stock prices, to plunge while pushing interest rates higher. If the disruption were serious enough, it could push the country into a recession.

The current account (CA) is the broadest measure of trade because it covers not only trade in goods and services but also investment flows between countries. It also represents the amount of U.S. assets that have been transferred into foreign hands to cover the gap between American exports and imports.

Democrats contend the current account deficit illustrates that America's control over its economic destiny is being transferred to countries like China and Japan that hold sizable amounts of U.S. government bonds and other assets.

The new report indicated the current account deficit for the final three months of this year did show improvement, dropping by 14.6 percent to $195.8 billion after hitting a record of $229.4 billion in the third quarter. The improvement reflected a big drop in oil prices from their record highs this summer.

Despite five straight years of the current account deficit hitting new records, economists said there were signs the imbalance may narrow a bit this year.

A deficit of $856.7 billion in 2006 meant the U.S. was transferring more than $2 billion daily to foreigners last year to finance the trade gap.

For all of 2006, the United States had a goods deficit of $836 billion, a surplus in services of $70.7 billion and a deficit in investment flows of $7.3 billion. In addition, the government paid out $84.1 billion in a category known as unilateral transfers, which covers foreign aid.

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Mar 14, 2007, 8:48 PM

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