Trade deficit hits all-time high in October
A surge in oil imports and a flood of Chinese televisions, toys and computers helped to drive the U.S. trade deficit to an all-time high in October.
The Commerce Department reported Wednesday that the gap between what America sells overseas and what it imports rose by 4.4 percent to $68.9 billion, surpassing the record of $66 billion set in September.
The United States incurred record deficits in October with most of its major trading partners including China, the 25-nation European Union, Canada and Mexico. This development is certain to increase protectionist pressures in Congress, with many lawmakers already unhappy with the Bush administration’s trade policies.
The worse-than-expected October performance was blamed in part on the Gulf Coast hurricanes. They curtailed domestic production of oil, chemicals and plastics, forcing companies to turn to overseas suppliers.
Nigel Gault, an economist at Global Insight, a forecasting firm in Lexington, Mass., said the sharp deterioration in the deficit would shave about 1.1 percentage points from economic growth in the final three months of the year. He predicted it would come in at about 3 percent.
He also forecast that this year’s trade deficit would reach $730 billion, compared with the record of $617.6 billion last year. He predicted next year’s deficit would be an even worse $760 billion before the deficit finally begins to improve in 2007.
Critics pointed to the rising deficits as evidence that President Bush’s trade policies have failed to protect U.S. workers from an onslaught of imports made in China and other low-wage countries. These critics blame the trade deficits for the loss of 3 million manufacturing jobs in the U.S. over the past five years.
“Month after month, we see new record trade deficits that spell real trouble for the United States,” said Sen. Byron Dorgan, D-N.D. “Behind these deficits are massive numbers of American jobs lost to foreign countries.”
The administration is pursuing free trade deals with individual countries and negotiating a new global trade agreement under the auspices of the World Trade Organization. Critics say that approach is not working.
“We just don’t see how current U.S. strategy is going to reverse these very dangerous trends,” said Alan Tonelson, a research fellow at the U.S. Business and Industry Council. The group represents mainly small U.S. manufacturing companies.
Various lawmakers said the administration has failed to do enough to address China’s trade practices. They mentioned taking tougher action to force China to let its currency to rise in value against the dollar as a way of making U.S. goods more competitive.
Treasury Secretary John Snow said the key to improving the trade deficit was to get Europe and other major trading partners to boost their economic growth. That way, they could buy more U.S. exports.
He told reporters that America’s strong growth and low unemployment showed that the U.S. economy was now in a “sweet spot.” He spoke in a joint session with Commerce Secretary Carlos Gutierrez and Labor Secretary Elaine Chao where they highlighted the president’s economic record.