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U.S. trade gap hits record in January

By Jeannine Aversa
The Associated Press

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The Commerce Department reported yesterday that the trade imbalance mushroomed to $43.1 billion in the first month of 2004, representing a 0.9 percent increase from the previous month.

A 40 percent drop in meat and poultry exports to the lowest level since November 1993 helped widen the gap, as countries shunned American beef after the discovery of mad-cow disease. Imports may stay elevated as Americans demand more household goods and apparel made abroad, economists said.

"It's not time to throw in the towel on exports just yet," said Jay Bryson, global economist at Wachovia Securities in Charlotte. "All indications are that foreign growth will remain solid, and that should boost exports in coming months. Assuming oil prices don't spike and mad cow goes away, you will see the trade deficit start to narrow."

For all of 2003, the trade deficit posted an annual all-time high of $489.9 billion, according to revised figures.

The latest snapshot of trade activity comes as tensions have grown over global trade and the migration of jobs from the United States to other countries.

Bush defended his economic policies, including free trade, yesterday and renewed a warning against economic isolationism — a swipe at presumptive Democratic presidential nominee John Kerry, though Bush did not mention him by name.

Kerry, a Massachusetts senator, has said he would place all trade deals under a 120-day review and would require companies to provide notice before moving jobs to other countries.

The trade deficit in January grew as the value of imported goods and services eclipsed the value of U.S. exports.

Sherry Cooper, chief economist at BMO Nesbitt Burns, called the drop in exports disturbing and said the trade deficit probably would be a drag on economic growth in the current quarter.

John Lonski, chief economist at Moody's Investors Service in New York, said the widening deficit was "consistent with other signs of an economy that appears to be losing its footing."
 
Federal Reserve Chairman Alan Greenspan last week said that a weaker U.S. dollar should eventually help narrow the country's trade deficits.

Yesterday's report also showed that America's politically sensitive trade deficit with China expanded to $11.5 billion in January, up from $9.9 billion in December.

U.S. manufacturers contend that China is deliberately undervaluing it currency, the yuan, by as much as 40 percent, giving that country a big trade advantage when competing with U.S. companies and contributing to the loss of U.S. jobs.

The Bush administration has been pressing Beijing to stop linking its currency to the dollar and let the value of the yuan be set in open markets.

Separately, the Mortgage Bankers Association said U.S. applications for mortgages rose 1.2 percent last week as interest rates dropped.

Another report showed U.S. wholesale inventories rose less than expected in January. But economists said historically lean inventories meant businesses would likely have to restock shelves soon, which would give a boost to the economy.

Material from Bloomberg News and Reuters is used in this report.

Copyright © 2004 The Seattle Times Company