Shortfall in trade sets mark - Oil imports, Chinese goods cited in 5th straight record annual deficit

Shortfall in trade sets mark - Oil imports, Chinese goods cited in 5th straight record annual deficit
Copyright © 2007, Chicago Tribune and Bloomberg News
Published February 14, 2007

WASHINGTON -- The U.S. trade deficit widened to a record amount for the fifth straight year in 2006, as American purchases of Chinese goods and imported oil more than offset an increase in exports.

The gap between imports and exports expanded 6.5 percent last year, to $763.6 billion, the Commerce Department said Tuesday. The shortfall increased to $61.2 billion in December from a month earlier, more than economists forecast.

China replaced Mexico as America's second-largest trading partner, behind Canada, during the year, intensifying complaints from lawmakers that the nation is keeping its currency weak to spur exports. The deficit also was swollen by rising oil prices.

"The big picture is exports are growing, but in '06 imports grew faster, particularly consumer goods from China," said Chris Low, chief economist at FTN Financial in New York. "The crude oil rise was entirely from price increases."

For the year, imports increased to an unprecedented $2.2 trillion from $1.99 trillion in 2005. Exports rose to a record $1.44 trillion from $1.28 trillion.

"In the long run, I expect the deficit to gradually shrink," said Nigel Gault, director of U.S. research at Global Insight Inc. in Lexington, Mass. "We expect growth in exports combined with slower import growth. The 2007 annual deficit should be substantially below the 2006 figure."

Imports of goods and services rose 2.1 percent in December, to $186.7 billion. Shipments of consumer goods to the U.S. increased to a record $40 billion, and purchases of foreign autos and parts surged to $22.6 billion, also an all-time high.

Oil imports increased to $23.2 billion from $21.5 billion in November, which was the lowest figure since July 2005. America's oil import bill jumped to $302.5 billion last year from almost $252 billion in 2005.

In December, exports rose 0.6 percent, to $125.5 billion, reflecting higher sales of autos, food and consumer goods.

The politically charged trade gap with China shrank to $19 billion in December from $22.9 billion in November, but for all of last year the deficit surged to $232.5 billion from $201.5 billion.

Treasury Secretary Henry Paulson told the Senate Budget Committee last week that the U.S. is pressing China to seek more flexibility in the Chinese currency's value.

"They've been moving it more quickly, but it's not moving quickly enough," Paulson said.

The trade gap with Japan narrowed to $7.5 billion in December from $7.9 billion in November. For all of last year, it expanded to $88.4 billion from $82.5 billion.

The shortfall with Canada, America's biggest trading partner, widened to $5.6 billion in December from $5.2 billion in November. It narrowed to $72.8 billion for all of 2006 from $78.5 billion.