The U.S. trade deficit in December jumped to the highest level in more than two years as American exports fell and imports climbed to a record level.
The deficit jumped 17.1 percent to $46.6 billion in December, the biggest imbalance since November 2012, the Commerce Department reported Thursday. The widening trade gap reflected a drop in exports, which fell 0.8 percent to $194.9 billion. Imports soared 2.2 percent to $241.4 billion.
The deficit for all of 2014 increased to $505 billion, up 6 percent from the 2013 deficit of $476.4 billion. Economists expect the deficit to widen further in 2015 as strong growth in the United States boosts imports, while weak growth overseas and a rising dollar continue to depress exports.
The politically sensitive deficit with China set a record for 2014, rising 23.9 percent to $342.6 billion. The United States deficit with China surpassed the deficit with Japan in 2000 and since then, the trade gap with the world's No. 2 economy has set a new record nearly every year.
Those deficits are creating pressure on Congress and the Obama administration to take tougher actions against what critics see as China's unfair trade practices. U.S. manufacturers contend that China is manipulating its currency to keep it artificially low against the dollar as a way to make American products more expensive in China's market and Chinese products cheaper in the United States.
The $505 billion deficit for the year was the largest imbalance since a $537.6 billion deficit in 2012.
The overall economy grew at a moderate 2.6 percent rate in the final three months of 2014 after turning in a sizzling 5 percent growth rate in the July-September period. Part of the slowdown reflected a swing in trade, which boosted growth by 0.8 percentage point in the third quarter but reduced growth by 1 percentage point in the fourth quarter.
For the whole year, trade was a small negative, trimming growth by 0.2 percentage point. The economy grew 2.4 percent in 2014, and many economists believe growth in 2015 will be slightly above 3 percent, giving the country the best growth in a decade
The trade deficit would have been even larger last year if it weren't for the energy boom in the United States. Higher production at home has been lowering America's reliance on foreign oil. For the whole year, petroleum imports fell 9.6 percent to $334.1 billion, the lowest level for imports since 2009. U.S. petroleum exports jumped 5.9 percent to a record $45.7 billion.
The widening trade deficit comes at a time when the administration is hoping to finally get Congress to approve the fast-track authority it needs to wrap up a major 12-nation trade agreement with Pacific Rim countries known as the Trans-Pacific Partnership.
The administration sees the trade deal as one of the areas where he may be able to find common ground with Republicans, who now for the first time in his presidency control both houses of Congress.
While economists believe lower oil prices will help the trade picture in 2015 as well, they are still forecasting the deficit to widen slightly. Faster growth in the United States is attracting more imports, while U.S. exporters continue to struggle with the impact of weaker growth overseas and a stronger dollar.