Americans' import buys fuel record trade deficit
WASHINGTON -- America's trade deficit ballooned to an all-time high in 2003, reflecting the hearty U.S. appetite for foreign-made cars, clothing and TVs.
The total deficit was $489.4 billion, 17.1 percent larger than the previous record, set in 2002, the Commerce Department reported Friday. The deficit with China alone was close to $124 billion, also a record.
The value of foreign goods and services sold to the United States swelled to a record $1.5 trillion for the year, an 8.3 percent increase, as the economy gained momentum in the second half of the year. Consumers and businesses spent briskly, reflecting increased confidence that the recovery would last.
Imports of automobiles and parts came to $210.1 billion in 2003, a record high. Sales to the U.S. market of foreign-made consumer goods -- a category that includes clothing, television sets, furniture and jewelry -- also came to a record high of $333.8 billion last year.
"That appetite is a reflection that the U.S. economy is much stronger than the rest of the world," said Oscar Gonzalez, economist at John Hancock. "We are the engine of demand."
U.S. exporters, however, also saw gains last year. Exports totaled $1 trillion -- the best showing since 2000 -- and a 4.6 percent increase from 2002.
The increase in exports was helped by a weaker U.S. dollar, which makes U.S. goods less expensive and thus more competitive in world markets, and improving economic times abroad.
Exports of consumer goods, including gems, household appliances and cosmetics, came to $89.9 billion in 2003, an all-time high. Sales of U.S. industrial supplies to other countries in 2003 totaled $172.9 billion, also a record high. Exports of foods, feeds and beverages totaled $55.1 billion, the highest level since 1996.
In coming months, "The global economic rebound will help correct the massive trade imbalance, but the progress will be slow," said Sherry Cooper, chief economist at BMO Nesbitt Burns.
The latest snapshot of trade activity comes amid rising tensions over global trade and worries about the flight, or outsourcing, of U.S. jobs to other countries. President Bush's chief economist, Gregory Mankiw, struck a political nerve this week when he described the loss of U.S. jobs to overseas companies as "just a new way of doing international trade."
Painfully slow job growth in the United States is a political sore spot for the president and an issue that Democrats, seeking to capture the White House, like to point out to voters in an election year.
The Bush administration believes the best way to handle the mushrooming trade deficits is to get other countries to remove trade barriers and open their markets to U.S. businesses. But critics point to the deficits as evidence that the president's free-trade policies aren't working and are a factor in the loss of U.S. jobs.
The United States' politically sensitive deficit with China in 2003 was almost $124 billion, the biggest ever, as imports from China hit a record high. By country, the U.S. trade gap with China was the largest.
America's manufacturers contend that China is deliberately undervaluing its currency, the yuan, by as much as 40 percent. That would give China a big trade advantage when competing with U.S. companies and would contribute to the loss of U.S. factory jobs.
The administration has been pressuring China to sever its currency's link to the dollar and has been pressing for it to let the value of the yuan be set in open markets.
Democratic presidential contender Sen. John Edwards of North Carolina complained that Bush is doing too little to solve the problem. "This administration is not serious about stopping China's manipulation of its currency or about enacting trade and tax laws that create good jobs here at home," Edwards said.
Last year's trade relationship with China did have a bright spot for U.S. companies: exports totaled a record $28.4 billion.
"China is rapidly becoming a more important export market for U.S. producers thanks to its strong economic growth and entry into the World Trade Organization," said David Huether, chief economist at the National Association of Manufacturers.
After China, the next biggest U.S. trade gap by country for 2003 was with Japan, although that trade deficit of $66 billion was the lowest since 1998. Canada came in third with a trade gap of $54.4 billion, followed by Mexico, a $40.6 billion deficit, and Germany, with a $39.2 billion trade gap.
Economists believe economic growth over the final three months of 2003 will be revised downward slightly from an initially estimated rate of 4 percent because of the fat trade deficit. The government releases its second projection at the end of the month.