Iowa Public Television


Trade Deficit Is the Highest in 13 Months

posted on June 13, 2008

Washington (AP) - The trade deficit increased to the highest level in 13 months in April as America's bill for foreign crude oil soared to a record high.

The Commerce Department reported on Tuesday that the gap between what the nation imports and what it sells abroad rose by 7.8 percent, to $60.9 billion, the largest imbalance since March 2007.

The growing deficit was driven by a $4.3 billion increase in crude oil imports, which jumped to a record $29.3 billion in April on an average price of a $96.81 a barrel. With oil trading now frequently trading above $130 a barrel, the cost of imports is likely to rise further in coming months.

United States export sales totaled $155.5 billion in April, up 3.3 percent, reflecting big gains in sales of commercial aircraft, farm machinery, medical equipment and computers. But this increase was swamped by a 4.5 percent rise in imports, which also set a record at $216.4 billion, reflecting the huge increase in oil as well as big gains in imports of autos and consumer goods.

The April deficit was $4.4 billion higher than the March imbalance of $56.5 billion.

The deficit through the first four months of this year is running at an annual rate of $707.5 billion, up slightly from last year's deficit of $700.3 billion, which was a 7 percent drop from 2006. The improvement last year came after the trade imbalance set records for five consecutive years.

Many economists are looking for the deficit to shrink again this year as a sharp economic slowdown in the United States cuts into consumer demand for imports and the weak dollar helps American exports.

After tacitly accepting the decline in the dollar for years to help exports, Bush administration officials are now talking about the need for a stronger dollar, a reflection of the pain being inflicted on Americans by high gasoline prices. While a weak dollar makes American exports more competitive on overseas markets, oil producers demand higher prices for crude oil, which is priced in dollars.

The politically charged deficit with China, which had fallen sharply in March, rose by 25.9 percent in April, to $20.2 billion, reflecting higher imports of Chinese products like cellphones and clothing.

America's trade deficit with Canada increased by 18.6 percent in April, to $7.6 billion, the highest level since January 2006.

The deficit with Mexico rose by 14.2 percent, to $6.8 billion, while the imbalance with the European Union increased 14 percent, to $8.5 billion. The deficit with the Organization of the Petroleum Exporting Countries rose 10.5 percent, to a record $15.6 billion.

Tags: deficit foreign relations news oil trade