Trade Gap Falls 9.2% in March
The U.S. trade deficit fell sharply in March to $54.99 billion, the lowest level in six months, as U.S. exports climbed to an all-time high. Imports declined, reflecting in part a slowdown in clothing shipments from China.
The Commerce Department reported Wednesday that the gap between what the United States imports and what it sells to foreign countries narrowed by 9.2% from a record monthly deficit of $60.57 billion in February.
Even with the big improvement in March, the deficit through the first three months of this year is still running at an annual rate of $696 billion, 12.8% higher than the $617.08-billion record for all of 2004.
The March narrowing caught economists by surprise. They had been forecasting that the trade gap would hit another record. However, they cautioned against reading too much into one month’s improvement.
“This is a brief respite from a lot of continued red ink,” said Mark Zandi, chief economist at Economy.com. “The large decline clearly overstates any improvement we will see this year.”
The trade deficit, which has set records in six of the last seven years, has battered U.S. manufacturing companies, which have lost more than 3 million jobs since mid-2000.
That has raised protectionist pressures in Congress. Many lawmakers accuse China, the country with the largest trade imbalance with the U.S., of unfair trade practices including manipulation of its currency.
The Treasury Department denied rumors circulating in global currency markets that China was on the verge of scrapping its current system of keeping the yuan tightly linked to the U.S. dollar.
U.S. manufacturers contend that the practice undervalues the yuan by as much as 40%, making Chinese goods cheaper for American consumers and U.S. products more expensive in China.
Private economists, who had been predicting that the March deficit could set a record, said the sharp improvement should boost economic growth for the first three months of this year from an initial estimate of 3.1% to 3.5% or even higher.
The March trade improvement reflected a 1.5% increase in exports of U.S. goods and services, which rose to an all-time high of $102.2 billion. It was the fourth straight monthly record for U.S. export sales and reflected big gains in shipments of such things as commercial aircraft, telecommunications equipment and farm products.
Imports, which had hit a record high in February, fell by 2.5% to $157.19 billion, reflecting a big drop in imports of foreign cars and in textile and clothing imports from China.
This helped to offset a 4.1% increase in the U.S.’ foreign oil bill, which rose to a near-record $18.9 billion.
The deficit with China declined by 7% to $12.9 billion in March. Part of the decrease reflected a 21.2% drop in imports of Chinese clothing and textiles. However, even with this decline, textile and apparel shipments from China are running 54% higher than a year ago, reflecting the removal of global textile quotas.
