Trade Deficit Lowest in Seven Months
Thursday October 11, 4:32 pm ET
By Martin Crutsinger, AP Economics Writer
Falling Dollar Pushes Exports to Record Levels and Helps Lower Trade Deficit
WASHINGTON (AP) -- The falling dollar led more foreigners to buy American in August, helping to push the trade deficit down to the lowest point in seven months. That was welcome news for the Bush administration as it tries to deal with a Congress unhappy over huge trade imbalances and 3 million lost manufacturing jobs.
President Bush also got good news Thursday on his other deficit headache. The budget deficit declined in 2007 to the lowest level in five years, dropping to $162.8 billion, an $85 billion improvement over 2006.
Bush said the declining budget deficit was a sign that his economic strategy of cutting taxes to grow the economy was working. But Democrats pointed to the soaring national debt under Bush as evidence of his fiscal irresponsibility.
The Commerce Department reported that the trade deficit declined to $57.6 billion in August, down 2.4 percent from the July imbalance. It was the lowest gap between exports and imports since January and a much better showing than had been expected.
The improvement reflected a 0.4 percent rise in exports, which climbed to a record $138.3 billion, as the decline in the value of the dollar against many other foreign currencies boosted sales of American farm products, industrial supplies and consumer goods to all-time highs.
A weaker dollar makes the cost of imports and foreign trips more expensive for Americans, but makes American products cheaper on overseas markets.
Imports actually dropped by 0.4 percent to $195.9 billion, reflecting lower shipments of foreign cars and furniture, which offset a big increase in the foreign oil bill, which rose to the highest level in a year, as the price of a barrel of imported crude hit an all-time high.
The politically sensitive trade deficit with China fell by 5.3 percent to $22.5 billion but remained on track to surpass last year's record figure, a development that is causing heartburn in Congress.
While imports of Chinese goods declined slightly, the drop did not seem related to the recent string of high-profile recalls of unsafe products ranging from tires and toothpaste to toys. Toy shipments from China were actually up sharply as retailers stocked their shelves for Christmas.
The boom in U.S. exports is helping to cushion the U.S. economy from the adverse effects of the housing bust and a severe credit crunch. Analysts said about one-third of overall economic growth in the July-September quarter is likely to come from the improved trade showing.
Through the first eight months of this year, the trade deficit is running at an annual rate of $708 billion, down 6.7 percent from last year's imbalance of $758.5 billion, which had been the fifth consecutive record deficit.
"The global value of the dollar is really helping us," said Frank Vargo, vice president for international affairs at the National Association of Manufacturers. "U.S. manufactured goods exports are the strongest element in our economy now."
Even with the third straight monthly decline in the deficit, Bush's critics contended that the imbalance remains at harmfully high levels and the string of record deficits has contributed to the loss of 3 million manufacturing jobs since 2000. They linked the high trade deficits to the high budget deficits, which increase the country's dependence on foreigners to hold U.S. debt.
"Unless the administration reins in soaring budget and widening trade deficits, its lasting legacy will be selling the future of our economy to our trading partners around the world," said Sen. Charles Schumer, D-N.Y.
Schumer and other lawmakers are pushing legislation that could lead to economic sanctions against China if that country does not allow the value of its currency to rise more quickly against the dollar. Manufacturers contend the yuan is undervalued by as much as 40 percent, meaning that the weaker dollar against other currencies is not having an impact in trade with China.
On Thursday, Bush will deliver a major speech on trade in Florida, part of a concerted campaign to get Congress to approve three pending free trade deals with the Latin American countries of Peru, Panama and Colombia and a fourth free trade deal with South Korea.
The agreement with Peru is given a good chance of passage this year but there are greater obstacles facing the other three agreements.
Secretary of State Condoleezza Rice said Tuesday the Latin American agreements made good business sense and were of "critical strategic value" to U.S. interests in the Western Hemisphere. This weekend Commerce Secretary Carlos Gutierrez is leading a congressional delegation to Colombia in an effort to dispel concerns that the country is not doing enough to deal with drug-related violence and repressive tactics against labor leaders.
Trade report: census.gov
Budget report: fms.treas.gov
biz.yahoo.com
It's started. Yeah, the trade deficit has fallen. But that's because US exports are cheaper i foreign currency. Now if you're sitting on tons of US$ or US$-denominated assets, why would you continue to, considering that the US$ has been falling in value or years and nothing indicates the trend will reverse. The Democrats may spend on different things than the Republicans, but the will still spend and they will NOT spend on productive assets or reduce the size of bloated bureaucracies.
And Bush seems to be after a North and South American Union similar to the European Union. Or at least a trading area like the European Economic Community. |
