Trade deficit soars as Americans buy Chinese phones, toys, TVs
WASHINGTON -- The trade deficit jumped to the second-highest level in history as surging demand for foreign oil swamped a small gain in U.S. exports, the government reported Thursday. America's trade gap with China hit an all-time high as retailers stocked up on cell phones, toys and televisions in preparation for Christmas sales.
The worse-than-expected trade performance in August -- a deficit of $54 billion -- represented a 6.9 percent widening from July's trade gap of $50.5 billion. The record monthly deficit was set in June at $55 billion.
Exports, helped by a rise in shipments of commercial aircraft and record foreign sales of American cars and auto parts, rose by a slight 0.1 percent to $96 billion in August.
However, this improvement was overwhelmed by a 2.5 percent surge in imports to a record $150.1 billion as America's foreign oil bill climbed to the highest level in history. The average price for crude oil imports in August jumped to a 23-year high of $36.37 per barrel.
Analysts said the bad news on trade will only get worse in coming months given that oil prices have continued to soar, with crude oil hitting a new record of $54.76 per barrel Thursday.
"The skyrocketing oil prices are sucking the wind out of the economy," said Joel Naroff, chief economist at Naroff Economic Advisors. "And the worst is yet to come."
In a second economic report, the Labor Department said the number of Americans filing new claims for unemployment benefits rose by 15,000 last week to a seasonally adjusted level of 352,000. The four-week moving average of claims, which smooths out weekly changes, rose by 4,000 to a seven-month high of 352,000.
The jobless claims report reflects a labor market that is continuing to disappoint economists' expectations. The country added a lower-than-expected 96,000 jobs in September as the unemployment rate held steady at 5.4 percent.
The economy raced ahead at a 4.5 percent growth rate in the first three months this year before slowing to a 3.3 percent growth rate in the April-June quarter as surging oil prices sent the trade deficit soaring and took a big bite out of consumer spending.
For the year, America's trade deficit is running at an annual rate of $590 billion, 19 percent higher than the previous record, last year's $496.5 billion imbalance.
Democrats contend President Bush's failed economic policies have pushed the country back into a period of twin deficit troubles with the economy buffeted by runaway federal budget deficits which increase domestic demand and send the trade deficit soaring.
The administration announced Thursday that the federal deficit hit a record $413 billion for the 2004 budget year, which ended Sept. 30. That is up 9.5 percent from last year's record of $377 billion.
Democratic presidential challenger John Kerry has pointed to the string of record trade deficits run up since Bush took office as evidence that the administration has failed to protect American workers from unfair trade practices engaged in by low wage countries such as China.
In Wednesday night's final debate, Kerry criticized Bush for failing to pursue an unfair trade practice complaint that would accuse China of rigging its currency system to keep the yuan undervalued by as much as 40 percent against the U.S. dollar, giving Chinese products a huge competitive advantage against American goods.
"When it comes to enforcing trade agreements, standing up for American workers and creating opportunities for American companies, this White House has been a wet noodle," Kerry campaign spokesman Phil Singer said in reaction to the trade report.
In August, the trade deficit with China climbed to a record $18.1 billion, pushed higher by a surge in demand for cell phones, toys and games, televisions and VCRs as U.S. retailers stocked their shelves in advance of the holiday shopping season.
Even trade in services, normally America's strength in international markets, sank in August to a surplus of $3.4 billion, 19 percent below July and the smallest surplus since this trade series began in 1992. The big decline was blamed on U.S. television payments to broadcast the Olympic games.
The Bush administration accuses Kerry of being an "economic isolationist" and argues that its policy of pushing to open foreign markets by negotiating free-trade agreements with other nations represents the best approach to keeping America competitive in a global economy.
However, the nation has lost 2.7 million manufacturing jobs over the past four years and some sectors vulnerable to foreign trade such as textiles have been particularly hard hit.
A coalition of textile groups asked the administration Tuesday to limit imports of textiles from China, timing the filing of its case to force the administration to make a preliminary ruling by Nov. 1, the day before the election.