Trade Gap Jumps to a Record $44.2 Billion
Thursday February 20, 9:05 am ET
WASHINGTON (Reuters) - The U.S. trade deficit unexpectedly jumped 10.6 percent in December to a record $44.2 billion, as the seemingly insatiable U.S. desire for imports expanded and exports slumped, the U.S. government said on Thursday.
The monthly trade gap far exceeded the average estimate of $38.8 billion by analysts before the report and pushed the tally for the year to a record $435.2 billion, as U.S. exports declined for the second year.
In a sign the U.S. economy continues to outperform its major trading partners, imports increased 1.7 percent to $125.4 billion in December while exports declined 2.6 percent to $81.2 billion.
The biggest factor behind the monthly export decline was a $2.2 billion drop in capital goods exports.
On an individual country basis, the U.S. trade deficit with Germany set a record in December at $4.1 billion, fueled by a record $6.3 billion in imports. The trade gap with Japan, at $7.1 billion, was the highest since October 2000, when it reached the same level.
The U.S. trade deficit increased 21.5 percent in 2002, propelled by record high imports from China and Western Europe. Bilateral trade deficits with China, Western Europe, Mexico, and South and Central America also set records in 2002.
Imports from China surged to $125.2 billion, surpassing Japan as the United States' largest import partner behind Canada and Mexico.
While U.S. exports to China also set a record last year, they totaled only $22.1 billion, pushing the bilateral trade deficit to a record at $103.1 billion.
Sung Won Sohn, chief economist for the Wells Fargo Bank in Minneapolis, said the rapidly expanding trade deficit with China represents its appeal as a low-cost manufacturer.
"In a difficult economy, everyone is trying to cut cost and raise productivity. The best way to do that is to produce in China," Sohn said.
U.S. exports fell 2.5 percent in 2002 to $973 billion. Exports to Western Europe slipped to the lowest level since 1997 while U.S. exports to Japan were the lowest since 1993.
Greg Mount, deputy chief economist at Bank One, said the higher trade deficit with Europe was due to a combination of forces including the strong U.S. dollar and a slump in U.S. productivity in 2001.
With the dollar now having lost some of its value against the euro, and U.S. productivity on the upswing, the trade gap with Europe should narrow in 2003, he said.
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