Trade deficit falls in May

WASHINGTON – The trade deficit fell in May, reflecting a rise in U.S. exports to the highest level in history and a temporary decline in foreign oil prices. But the improvement was likely to be short-lived, with oil prices again hovering around record levels.

The Commerce Department said Wednesday that America’s trade imbalance declined to $55.3 billion in May, an improvement of 2.7 percent from April.

However, the deficit with China rose to $15.8 billion, the highest since last November, pushed upward by a 25.6 percent surge in imports of Chinese clothing and textiles.

Even with the narrowing of the overall deficit in May, the trade imbalance through this year’s first five months is running at an annual rate of $681.6 billion, 10 percent above last year’s all-time record of $617.6 billion.

Analysts believe the underlying trends are so strong that the deficits this year and in 2006 will set new record highs.

“There is no question that the deficit this year will be worse than last year. A number of the improvements in May were temporary,” said Nariman Behravesh, chief economist at Global Insight, an economic forecasting firm in Lexington, Mass.

Critics blame the deficits on free-trade policies pursued by President Bush and his predecessors. They contend those policies have failed to protect American workers from unfair overseas competition.

China, which has replaced Japan as the country with which the United States runs the largest deficits, is often singled out for much of the criticism.

The administration has recently toughened its stance with China. It reimposed quotas to stem a flood of Chinese textile and clothing imports and is pressuring China to crack down on copyright piracy and to revalue its currency.