WASHINGTON – America's trade deficit rose in May as the price of imported oil jumped by the largest amount since 1990 in the run-up to the first U.S.-Iraq war.
The Commerce Department reported that the trade imbalance rose by 0.8 percent to $63.8 billion compared to a revised April deficit of $63.3 billion. While the increase was smaller than the 2.5 percent rise that economists had been expecting, it still represented the sixth largest deficit in history.
So far this year, the trade deficit is running at an annual rate of $763 billion, 6.5 percent higher than last year's record of $716.7 billion. President Bush's critics say the swelling trade deficits, which they blame on unfair trade practices in countries such as China, have contributed to the loss of nearly 3 million manufacturing jobs since Bush took office.
The increase in the May deficit reflected a 16.9 percent jump in America's foreign oil bill, which totaled $27.9 billion, up $4 billion from April. The increase reflected a big jump in the average price of imported crude oil which rose to $61.74 per barrel, an increase of $4.92 from April. That was the biggest monthly jump since a $6.06 increase from August to September 1990 after Iraq's invasion of Kuwait sent global oil prices soaring.
Economists are predicting that the trade deficit will worsen further in coming months, reflecting further increases in world oil prices, which hit a new record above $75 per barrel last month.
The politically sensitive deficit with China rose by 4 percent to $17.7 billion, reflecting big gains in imports of cell phones, clothing and textiles and writing and art supplies.
Both U.S. exports to other countries and imports set records in May.
Exports rose a sharp 2.4 percent, the biggest monthly gain in 17 months. The increase pushed total exports to $118.7 billion as overseas sales of American farm goods, industrial supplies and consumer goods climbed to all-time highs.
Imports, driven higher by the surging oil prices, rose 1.8 percent to a record $182.5 billion.
The U.S. deficit with Mexico rose to a record of $5.5 billion but the deficit with Canada, America's other partner in the North American Free Trade Agreement, declined slightly to $5.8 billion.
The deficit with the 25-nation European Union rose to $10.8 billion while the imbalance with Japan edged down slightly to $7.1 billion.
The administration is facing increasing pressure in an election year to show progress in dealing with the deficit. New Treasury Secretary Henry Paulson has said he will continue to pursue efforts to get China to overhaul its currency system to allow the yuan to rise in value against the dollar.
American manufacturers contend the yuan is undervalued by as much as 40 percent against the dollar. That makes Chinese products cheaper for American consumers and makes American goods more expensive in China.