Ooooppps! I though we were reducing our dependace on foreign oil?Trade deficit hits high as oil imports soar
A surge in oil imports and a flood of Chinese televisions, toys and computers helped to drive the U.S. trade deficit to an all-time high in October.
The Commerce Department reported Wednesday that the gap between what America sells overseas and what it imports rose by 4.4 percent to $68.9 billion, surpassing the old record of $66 billion set in September.
The United States incurred record deficits in October with most of its major trading partners including China, the 25-nation European Union, Canada and Mexico, a development that was certain to increase protectionist pressures in Congress, where many lawmakers are already unhappy with Bush administration trade policies.
The worse-than-expected October performance was blamed in part on the Gulf Coast hurricanes, which curtailed domestic production of oil, chemicals and plastics, forcing companies to turn to overseas suppliers.
Nigel Gault, an economist at Global Insight, a forecasting firm in Lexington, Mass., said the sharp deterioration in the deficit would shave about 1.1 percentage points from economic growth in the final three months of the year, which he predicted would come in at around 3 percent.
He also forecast that this year's trade deficit would hit $730 billion, far above the previous record of $617.6 billion set last year. He predicted next year's deficit would be an even worse $760 billion, before the deficit finally begins to improve in 2007.
Critics pointed to the sharply rising deficits as evidence that President Bush's trade policies have failed to protect American workers from an influx of imports made in low-wage countries such as China. They blame the trade deficits for the loss of 3 million manufacturing jobs over the past five years.
"Month after month, we see new record trade deficits that spell real trouble for the United States," said Sen. Byron Dorgan, D-N.D. "Behind these deficits are massive numbers of American jobs lost to foreign countries."
Critics said the administration's strategy of pursuing free trade deals with individual countries and negotiating a new global trade agreement under the auspices of the World Trade Organization was not working.
"We just don't see how current U.S. strategy is going to reverse these very dangerous trends," said Alan Tonelson, a research fellow at the U.S. Business and Industry Council, which represents mainly small U.S. manufacturing companies.
Various lawmakers attacked the administration for failing to do more to address China's trade practices, including tougher actions to force China to let its currency to rise in value against the dollar as a way of making U.S. goods more competitive.
White House spokesman Scott McClellan told reporters that the administration believed its approach of emphasizing free trade agreements with various countries and pursuing global talks under way this week in Hong Kong was the best way to promote American exports.
Analysts had expected the October deficit to improve because global oil prices retreated after setting record highs in early September.
The average price of a barrel of imported oil did decline slightly to $56.29 in October, but the volume of shipments shot up as buyers turned to overseas suppliers following Gulf Coast production shutdowns. The total bill for imports in October hit a record of $25.8 billion, up 7.8 percent from September.
A surge of Chinese shipments of televisions, toys and computers delivered to American store shelves for holiday shoppers pushed the U.S. deficit with China to a new monthly record of $20.5 billion. So far this year, the deficit with China is running at an annual rate of $200 billion, far above last year's record deficit of $162 billion.
Administration efforts to re-impose quotas to halt a flood of Chinese clothing and textiles coming into the United States appeared to be having an impact as these imports were down 10.9 percent in October.
For October, imports of all goods and services rose by 2.7 percent to an all-time high of $176.4 billion, led by the surge in oil shipments. U.S. exports also rose but by a smaller 1.7 percent to $107.5 billion, reflecting in part a rebound in sales of commercial aircraft following the end of a strike at Boeing Co.
The United States set deficit records with a number of trading partners, including a $12.1 billion imbalance with the European Union, an $8.1 billion imbalance with Canada, the country's largest trading partner, and a $4.8 billion deficit with Mexico.