America's trade deficit narrows during June

WASHINGTON -- America's trade deficit narrowed in June as exports climbed to the highest level in two years, helped by better economic growth overseas. Imports were flat.

The Commerce Department reported Thursday that the trade gap was trimmed by 4.7 percent in June from May -- to $39.5 billion.

Exports of goods and services rose by 2.4 percent in June to $84.6 billion, the best showing since June 2001. Overseas sales of U.S.-made capital goods, including airplanes and computer accessories, showed the biggest gain. Exports of capital goods grew by $818 million to $24.1 billion from May to June.

Imports, meanwhile, held steady at $124.2 billion in June. A big drop in imports of consumer goods, such as clothing and toys, offset gains elsewhere, including imports of automobiles and parts, which rose to a record $18.2 billion in June.

The United States' politically sensitive trade imbalance with China widened in June to $10 billion as imports from the country climbed to $12.1 billion, the highest level since November 2002.

U.S. manufacturers and some U.S. senators have complained to Treasury Secretary John Snow that China is manipulating its currency to help boost overseas sales, giving the country an unfair trade advantage. Snow may address those concerns when he visits China as part of a broader trip to Asia in early September.

The United States' trade deficit with Japan, another country Snow plans to visit on that trip, grew to $5.4 billion in June, from $4.5 billion in May.

The Bush administration believes the way to deal with the bloated trade deficit is for other countries to remove trade barriers. That would allow U.S. companies to more freely do business in overseas markets, thus boosting America's global competitiveness, the administration says.

Critics say growing deficits are proof that the administration's free-trade policies are not working. Many U.S. companies have moved operations overseas and imports are flooding into the United States, a situation that has cost millions of lost American manufacturing jobs.