Gaps With Asia Boost Trade Deficit
The U.S. trade deficit jumped to a record $25.94 billion in October, as gaps with China and Japan swelled to new highs and oil prices climbed to nearly a three-year peak, the government said Thursday.
The unexpected jump in the deficit came two weeks after the collapse of global trade-liberalization talks in Seattle and highlighted the difficulty Washington is having prying open foreign markets as American exports slipped for a second straight month.
The Commerce Department said the trade deficit in October was wider than the $24.3-billion gap forecast by Wall Street analysts, and compared with a revised $24.15-billion deficit in September. Imports rose to an unprecedented $107.86 billion, driven by the booming U.S. economy, while exports slipped to $81.92 billion.
Commerce Secretary Bill Daley said the trade deficit may widen further in the months ahead and urged Japan and other trading partners to boost their economies.
He cited stronger exports and improved economic conditions in parts of Asia as encouraging signs, but said a 126% surge in oil prices from last January’s 25-year low was a major factor in the deficit’s rise.
The U.S. dollar lost ground after the October report was released. The value of the dollar against other world currencies suffers when the trade gap rises because it means Americans will send more dollars abroad to pay for their imports than the country will be drawing in from sales of exported goods.
Economists said rising imports reflected the vigor of the U.S. economy compared with relative weakness abroad.
With an economic boom continuing, U.S. consumers have been on a spending spree, snapping up foreign cars, electronic goods and other imports ahead of the Christmas shopping season.
But experts said such strong growth could not last.
As imports surged in October, the deficit with Japan overtook the deficit with China, the Commerce Department said.
Shipments from Japan rose to $12.17 billion, boosting the deficit to a record $7.18 billion in October, up from September’s $6.64 billion. It was the largest deficit with any country on record. Imports from China rose to a record $8.22 billion in October, pushing the deficit to $7.15 billion, up from $6.9 billion in the previous month.
U.S. officials are counting on a market-opening agreement with Beijing to boost U.S. exports over time. The agreement, reached in November, calls for China to cut tariffs and reduce other trade barriers, and paves the way for Beijing to join the World Trade Organization.
The trade deficit with major oil-producing countries slipped to $2.66 billion from $3.03 billion in September. But the October price per barrel of crude petroleum rose to $20.74, the highest since January 1997 when the price was $21.86.
“This has contributed substantially to the higher deficit this year,” Daley said. Analysts said rising oil prices may push the deficit even higher for November.
Imports from Mexico rose to a record $10 billion, more than offsetting U.S. exports to its neighbor of $8.58 billion. But the deficit with Mexico slipped to $1.41 billion from $2.18 billion in September.
The trade gap with Western Europe surged to $5.04 billion in October, compared with September’s $3.54 billion, as imports rose to a record $19.39 billion.
In addition, the Commerce Department said the deficit with Canada rose to $3.2 billion in October from $2.76 billion in the previous month.
A separate report showed that the number of Americans filing new claims for unemployment insurance dropped by 29,000 last week to 266,000, the lowest level since a matching figure in December 1973. The Labor Department said the jobless figures are often volatile in mid-December, plunging for three out of the last five years.
The four-week moving average of new jobless claims, which irons out weekly fluctuations to give a better indication of employment trends, fell to 282,000 in the week that ended Dec. 11 from 287,250 in the prior week.
