Trade Gap Hits Record High in 2004

The U.S. trade deficit (search) narrowed in December as oil import prices had their biggest monthly decline in nearly 14 years, but the annual trade gap still widened more than 24 percent in 2004 to a record $617.7 billion, the Commerce Department (search) said on Thursday.

The December trade gap totaled $56.4 billion, only slightly below the average estimate of Wall Street analysts surveyed before the report.

Commerce revised its estimate of the November trade gap to $59.3 billion, down from $60.3 billion, partly because of a computer error by Canada's statistical agency, which understated U.S. exports to Canada in November by $1.4 billion, the Commerce Department said.

Even with the downward revision, the November trade deficit remained a record and the December trade gap was the second highest.

U.S. exports of goods and services were a bright spot in the December trade report, at a record $100.2 billion. Annual exports were also a record at $1.15 trillion, but were surpassed by record imports of $1.76 trillion.

More than 25 percent of the annual trade deficit reflects the shortfall in trade with China, which hit a record $162 billion in 2004, up from last year's record $124 billion.

The rapid rise has lead to proposals in Congress to reduce imports from China by slapping tariffs on their products. The United States imported a record $196.7 million from China in 2004, while exporting a record $34.7 billion to that country.

Despite the huge gap, China is one of the fastest growing markets for U.S. exporters.

The bilateral trade deficits with Canada, Mexico and the European Union also set records in 2004.

Oil import prices fell $4.52 per barrel in December for the largest month-to-month decline since early 1991.

However, the United States still imported a record $94.1 billion, mostly oil, from members of the Organization of Petroleum Exporting Countries (search) in 2004 and the trade deficit with those countries was a record $71.9 billion.

To put the current U.S. trade gap in perspective, in 1983 the U.S. deficit in goods and services trade was only $57.8 billion, roughly the size of recent monthly trade gaps. In 1998, the total U.S. trade deficit was $164.9 billion, only slightly larger than the 2004 trade gap with China alone.