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U.S. Trade Deficit Surpasses $700 Billion

posted on July 13, 2007

Hello, I'm Mark Pearson. Forget Pamploma, Spain, the "REAL" running of the bulls this week was on Wall Street where the leading stock index surged to record highs.

**Thursday, Wal-Mart Stores, the world's largest retailer, posted better-than-expected sales figures, **propelling the Dow up by more than 280 points in its largest single-day increase in more than four years.

**The rally continued on Friday despite the release of a Commerce Department report showing total U.S. retail sales fell by the largest amount in nearly two years. **Much of the decline is due to a 2.9 percent drop in automobile sales as Detroit struggles with slumping demand for sport utility vehicles in the face of rising gasoline prices.

**And the government also reported this week that America's trade deficit rose to $60.04 billion in May.

Most of the deterioration in the balance of trade is blamed on a large increase in the foreign oil bill, which swamped record sales of U.S. products abroad. But rising imports, particularly with China, also are cause for concern.

U.S. Trade Deficit Surpasses $700 Billion

Although the total U.S. trade deficit is running at an annual rate of $709 billion, it's actually down 6.5 percent from last year's record imbalance of $758 billion.

Analysts expect the improvement of the trade deficit to continue this year as exports are helped by strong growth abroad and the declining value of the dollar against other currencies. But, there are still many hurdles to be overcome, chiefly the imbalance of trade with China…which holds the largest single deficit with the U.S.

Though the overall trade gap has declined since 2006, the deficit with China is way ahead of last year, up 17.2 percent this year and on pace to surpass the 2006 record of $233 billion.

Despite recent recalls, economists expect the deficit with China to keep widening. This week the Chinese government reported another record global trade surplus of $26.9 billion in June--almost double that of last year.

U.S. trade issues continue on the world stage as well, as farm subsidies continue to stir controversy. This week, Brazil, which questioned U.S. cotton subsidies in 2005 and won a favorable World Trade Organization ruling, joined Canada in a WTO complaint challenging other U.S. agriculture programs. They allege the subsidies distort trade by deflating international prices. Brazil has requested consultation with the U.S. hoping to receive more information on domestic price supports.

Both nations claim the U.S. has exceeded the WTO's annual subsidy limit of $19.1 billion, six out of the last eight years. The office of the U.S. Trade Representative in Washington refuted the claims calling them "unfounded."


Tags: China debt deficit money news trade