Gold9472
04-13-2005, 12:47 PM
U.S. Trade Deficit Swells Again, On Pace To Hit $717 Billion
By BARRIE MCKENNA
Wednesday, April 13, 2005 Page B1
WASHINGTON -- Another record monthly U.S. trade deficit is likely to slow the world's largest economy and heighten tensions with key trading partners, economists warn.
The U.S. trade gap surprised many analysts by growing another $2.5-billion (U.S.) to $61-billion, or 4.3 per cent between January and February, the U.S. Commerce Department reported yesterday.
Imports also hit a new high of $161.5-billion, up 1.6 per cent, paced by rising purchases of crude oil, cars, pharmaceuticals and various consumer and industrial products.
Exports were flat because of the U.S. dollar's recent climb and slow growth in key markets, such as Japan and Europe.
At its current pace, the deficit will top $717-billion this year, up a remarkable $100-billion from last year's record.
Economists said the growing trade deficit will sap anywhere from 0.5 to 1.5 percentage points from economic growth this quarter on an annualized basis.
"The trade deficit will likely remain above $60-billion for some time," said Jay Bryson, global economist at Wachovia Securities in Charlotte, N.C.
Several major brokerages reacted by cutting their quarterly U.S. growth forecasts, including Bear Stearns and HSBC Securities.
And while the monthly gap narrowed a bit with China in February, the swelling deficit has become an increasingly thorny political issue in Washington. Pressure is mounting on the Bush administration to strong-arm China into devaluing its currency, and for Congress to reject a recently negotiated free-trade deal with six Central American countries.
"The trade deficit with China . . . [is] a hot-button political issue," said Sherry Cooper, chief economist at BMO Nesbitt Burns Inc. in Toronto. "The revaluation calls are bound to get louder."
Some members of Congress want a blanket 28-per-cent duty slapped on all Chinese goods, roughly equal to what critics estimate is the overvaluation of the Chinese yuan. The yuan is pegged to the U.S. dollar at a rate of 8.3 yuan to the dollar, a regime supported by massive Chinese holdings of U.S. dollars. Prodded by textile and clothing manufacturers, the U.S. administration recently opened a probe into whether to reimpose quotas lifted in January on Chinese clothing and textile imports.
The trade gap shrunk in February with both Canada and China -- the leading sources of U.S. imports. The deficit with Canada was $5.8-billion, down from $6.2-billion in January. The deficit with China similarly fell to $13.9-billion from $15.3-billion, in spite of a surge in textile and clothing imports.
Chinese exports are up nearly 50 per cent from last year, a trend that has prompted some analysts to predict it will soon overtake Canada as the leading exporter to the United States.
But while that will eventually happen if Chinese exports to the United States continue to grow at the current pace, it's unlikely to occur this year.
Through two months, Canada has exported $43.6-billion worth of goods and services south of the border, compared with $34.8-billion for China.
Some members of Congress also want the administration to seek sanctions against the Organization of Petroleum Exporting Countries for running an "illegal cartel" that has run up oil prices to new highs.
Oil prices were a major component of the surge in the deficit. And because the futures price continued to rise in March, peaking at $58.28 on April 4, oil is also likely to be a factor in the months ahead.
There was some good news on the export front. Exports reached a record $100.5-billion, up slightly from $100.4-billion set in January and December.
But economists said the solid export performance isn't making a dent in the trade deficit, because imports are rising at a faster rate from a larger base.
"Because the level of exports is much smaller than the level of imports, exports must grow significantly faster than imports to stabilize the deficit," Wachovia's Mr. Bryson explained.
By BARRIE MCKENNA
Wednesday, April 13, 2005 Page B1
WASHINGTON -- Another record monthly U.S. trade deficit is likely to slow the world's largest economy and heighten tensions with key trading partners, economists warn.
The U.S. trade gap surprised many analysts by growing another $2.5-billion (U.S.) to $61-billion, or 4.3 per cent between January and February, the U.S. Commerce Department reported yesterday.
Imports also hit a new high of $161.5-billion, up 1.6 per cent, paced by rising purchases of crude oil, cars, pharmaceuticals and various consumer and industrial products.
Exports were flat because of the U.S. dollar's recent climb and slow growth in key markets, such as Japan and Europe.
At its current pace, the deficit will top $717-billion this year, up a remarkable $100-billion from last year's record.
Economists said the growing trade deficit will sap anywhere from 0.5 to 1.5 percentage points from economic growth this quarter on an annualized basis.
"The trade deficit will likely remain above $60-billion for some time," said Jay Bryson, global economist at Wachovia Securities in Charlotte, N.C.
Several major brokerages reacted by cutting their quarterly U.S. growth forecasts, including Bear Stearns and HSBC Securities.
And while the monthly gap narrowed a bit with China in February, the swelling deficit has become an increasingly thorny political issue in Washington. Pressure is mounting on the Bush administration to strong-arm China into devaluing its currency, and for Congress to reject a recently negotiated free-trade deal with six Central American countries.
"The trade deficit with China . . . [is] a hot-button political issue," said Sherry Cooper, chief economist at BMO Nesbitt Burns Inc. in Toronto. "The revaluation calls are bound to get louder."
Some members of Congress want a blanket 28-per-cent duty slapped on all Chinese goods, roughly equal to what critics estimate is the overvaluation of the Chinese yuan. The yuan is pegged to the U.S. dollar at a rate of 8.3 yuan to the dollar, a regime supported by massive Chinese holdings of U.S. dollars. Prodded by textile and clothing manufacturers, the U.S. administration recently opened a probe into whether to reimpose quotas lifted in January on Chinese clothing and textile imports.
The trade gap shrunk in February with both Canada and China -- the leading sources of U.S. imports. The deficit with Canada was $5.8-billion, down from $6.2-billion in January. The deficit with China similarly fell to $13.9-billion from $15.3-billion, in spite of a surge in textile and clothing imports.
Chinese exports are up nearly 50 per cent from last year, a trend that has prompted some analysts to predict it will soon overtake Canada as the leading exporter to the United States.
But while that will eventually happen if Chinese exports to the United States continue to grow at the current pace, it's unlikely to occur this year.
Through two months, Canada has exported $43.6-billion worth of goods and services south of the border, compared with $34.8-billion for China.
Some members of Congress also want the administration to seek sanctions against the Organization of Petroleum Exporting Countries for running an "illegal cartel" that has run up oil prices to new highs.
Oil prices were a major component of the surge in the deficit. And because the futures price continued to rise in March, peaking at $58.28 on April 4, oil is also likely to be a factor in the months ahead.
There was some good news on the export front. Exports reached a record $100.5-billion, up slightly from $100.4-billion set in January and December.
But economists said the solid export performance isn't making a dent in the trade deficit, because imports are rising at a faster rate from a larger base.
"Because the level of exports is much smaller than the level of imports, exports must grow significantly faster than imports to stabilize the deficit," Wachovia's Mr. Bryson explained.