WASHINGTON – America's trade deficit, on track to set an all-time high this year, edged up slightly to $41.84 billion in May as imports of foreign cars, televisions and business equipment all showed big gains.
The Commerce Department (search) reported Friday that the May imbalance rose by 0.5 percent from the April deficit of $41.65 billion even though U.S. exports posted their best gain since January with shipments of American-made autos and auto parts, computer chips and industrial machinery all showing gains.
For the first five months of this year, the U.S. trade deficit is running at an annual rate of $492 billion, well above last year's record high of $418 billion.
Critics point to the soaring deficit as evidence that the Bush administration is pursuing a failed trade strategy that has furthered the loss of millions of American manufacturing jobs as U.S. companies have closed their American factories and moved production overseas to take advantage of cheaper labor.
The administration, however, insists that the rising trade deficit reflects bigger economic forces, namely the fact that the U.S. economy, while mired in an anemic economic recovery, is still growing faster than the rest of the world.
Administration officials have been urging Japanese and European authorities to do more to boost their growth rates and provide stronger markets for American goods.
Also this spring, the administration made a subtle shift in its policy regarding the dollar, signaling that it did not plan to intervene in currency markets to stem the greenback's slide, a position American manufacturers had been urging the administration to take for years.
U.S. companies have complained that an overvalued dollar was pricing their products out of overseas markets and making imported goods cheaper and more attractive for U.S. companies.
The dollar's decline this year did appear to be boosting demand for American exports, which rose to $82.05 billion in May, a 0.9 percent rise which was the strongest monthly increase in percentage terms since January.
The increase reflected gains of $117 million in sales of autos and auto parts, which rose to $6.76 billion in May. Other products showing increases in May were exports of industrial machinery, up $101 million; computer accessories, up $96 million, and computer chips, up $50 million.
These gains offset declines of $9 million in exports of farm products, which fell to $4.29 billion, reflecting a big drop of $177 million in shipments of soybeans, which offset gains in exports of corn, meat and poultry and fruit.
Imports were also up in May, rising by 0.7 percent to $123.89 billion. That increase reflected a 4.7 percent rise in imports of foreign autos and auto parts, which increased to $17.67 billion during the month. Imports of business equipment were up by $75 million while shipments of televisions and video recorders climbed by $69 million.
Imports of foreign petroleum dropped by 8.3 percent in May to $10.34 billion with the improvement reflecting a decline in crude oil prices to an average of $24.11 per barrel, down from $26.02 in April and a high this year of $30.46 set in February.
However, the volume of crude oil imported set a monthly record of 320.5 million barrels as the United States increased its dependence on foreign oil supplies.
By country, the United States recorded its largest deficit with China, an imbalance of $9.86 billion, an increase of 4.3 percent from the April level. The deficit with Japan shrank a sharp 24.8 percent to $4.49 billion in May, the smallest imbalance since January 1998.
The deficit with Canada rose 7.2 percent to $4.09 billion in May while the deficit with Mexico, America's other partner in the North American Free Trade Agreement (search), was up 2.3 percent to $3.42 trillion.
Get all the stories you need-to-know from the most powerful name in news delivered first thing every morning to your inbox