U.S. Trade Deficit Narrows on Falling Oil Imports, Chinese Deficit

The U.S. trade deficit improved for a second month as oil imports fell sharply and the politically sensitive deficit with China narrowed to its lowest point in nine months.

The gap between what America sells abroad and what the country imports dipped by 0.7 percent to $58.4 billion in February, the smallest imbalance since November, the Commerce Department reported Friday.

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The improvement came even though exports fell by $2.8 billion during the month, reflecting lower sales of a variety of manufactured goods from computer accessories to industrial machinery and civilian aircraft.

But imports declined by an even larger $3.2 billion with the tab for foreign oil falling to the lowest level in 20 months. However, with oil prices again rising on global markets, that improvement could be short-lived.

The deficit with China, which had shot up in January, declined by 13.3 percent to $18.4 billion in February, the smallest gap since last May.

But even with that improvement, the trade gap with China is still running 25 percent above the pace set at the beginning of 2006, a year when the imbalance for the entire year soared to $232.5 billion. That was the largest deficit the United States has ever recorded with a single country and accounted for one-third of the total U.S. trade deficit last year.

The Bush administration is facing increased pressure from Congress, now in the hands of Democrats, to deal with America's soaring deficit with China.

In response, the administration has toughened its approach this year, filing two cases against China alleging unfair trading practices and imposing stiff penalty sanctions in a dispute involving Chinese government subsidies to paper manufacturers.

China has denounced these moves, raising the question of whether the new get-tough approach will achieve its desired end of lowering the trade gap or whether China will retaliate in some fashion that could spark an all-out trade war between two of the world's major economies.

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