WASHINGTON – The U.S. trade deficit in November surged to the highest level in 14 months, reflecting record foreign crude oil prices. The deficit with China declined slightly while the weak dollar boosted exports to another record high.
The Commerce Department reported that the trade deficit, the gap between imports and exports, jumped by 9.3 percent, to $63.1 billion. The imbalance was much larger than the $60 billion that had been expected.
The increase was driven by a 16.3 percent surge in America's foreign oil bill, which climbed to an all-time high of $34.4 billion as the per barrel price of imported crude reached new records while the volume of shipments declined slightly. With oil prices last week touching $100 per barrel, analysts are forecasting higher oil bills in future months.
Ian Shepherdson, an analyst at High Frequency Economics, noted that the deficit was also pushed higher by a big drop in exports of commercial aircraft. He said that setback is likely to be only temporary given the orders backlog that Boeing must fill to meet global demand.
The big surge in oil pushed total imports of goods and services up by 3 percent to a record $205.4 billion. Exports also set another record, rising by a smaller 0.4 percent to $142.3 billion. Export demand has been growing significantly over the past two years as U.S. manufacturers and farmers have gotten a boost from a weaker dollar against many other currencies. That makes U.S. goods cheaper on overseas markets.
Through the first 11 months of 2007, the deficit is running at an annual rate of $709.1 billion, down 6.5 percent from last year's all-time high of $758.5 billion. Analysts believe that the export boom will finally result in a drop in the trade deficit in 2007 after it set consecutive records for five years.
Critics of President Bush's trade policies, however, say the declining deficits will still leave the imbalance at a painfully high level, which they contend reflects unfair trade practices of other nations that have contributed to the loss of more than 3 million U.S. manufacturing jobs since 2000. Trade is expected to be a key issue in this year's presidential campaign, with many Democrats charging that the Bush administration has not fought hard enough to protect American workers and keep companies from shipping jobs overseas.
Much of their unhappiness is focused on China, where the U.S. trade deficit through the first 11 months of this year totals $237.5 billion, the highest annual imbalance ever recorded with a single country — with December still left to tally. The November deficit with China dipped slightly to $24 billion, but that was down from a record high of $25.9 billion set in October, when retailers were boosting orders for toys, games and video equipment to stock their shelves for Christmas.
Analysts predict further increases in the deficit with China in the months to come as U.S. demand has been unfazed by a string of high-profile recalls of a number of Chinese products, everything from tainted toothpaste to toys with lead paint. China reported Thursday that its trade surplus through December with the world rose by 47.7 percent to a record of $262.2 billion with the December surplus coming in at $22.7 billion, up 9.5 percent from a year ago.
Congress is considering bills that would clear the way for economic sanctions on China if it does not allow its currency to rise in value more rapidly against the U.S. dollar. American manufacturers contend the Chinese are manipulating their currency by keeping it undervalued by as much as 40 percent to gain price advantages against U.S. firms.
The Chinese warned last month during high-level economic talks that U.S. sanctions could spark retaliation by China. The administration argues that its approach of emphasizing dialogue along with filing trade cases against China at the World Trade Organization represents a better chance of resolving contentious trade issues between the two nations.
The growth in exports has been a major factor cushioning the blow to the economy from the slump in housing and a severe credit crunch. However, with oil pushing imports up sharply, analysts believe the help from trade in the final three months of last year will be shown to have been significantly smaller.
Many economists believe overall economic growth slowed to a barely discernible 1 percent annual rate in the October-December period and will likely weaken even further in the current quarter, raising fears of a possible recession.
The administration and Democrats in Congress are considering putting forward economic stimulus packages to ward off a downturn, and on Thursday Federal Reserve Chairman Ben Bernanke said the Fed was prepared to act in a "decisive" manner to protect the economy, comments viewed as a strong signal of further Fed rate cuts.
By country, the deficit with Canada, America's largest trading partner, dropped by 12.1 percent to $4.7 billion in November while the imbalance with Mexico rose by 1.4 percent to $7.6 billion. The imbalance with the European Union fell by 12.6 percent to $10.4 billion.