U.S. Feb. Trade Deficit Falls 4.1% as Gap With China Narrows
April 12 (Bloomberg) -- The U.S. trade deficit narrowed more than expected to $65.7 billion in February, led by a decline in Chinese imports that may be temporary and do little to ease demands for sanctions.
The gap narrowed by 4.1 percent from a record $68.6 billion in January, the Commerce Department said today in Washington. Imports fell 2.3 percent and exports dropped 1.2 percent. The deficit with China was the smallest in almost a year and may reflect business shutdowns during the lunar New Year holiday.
A jump in oil costs to near-record highs and growing demand for Chinese goods suggest U.S. imports, which exceed the country's exports by 50 percent, will again head higher and cause the deficit to swell. China's President Hu Jintao plans to visit President George W. Bush next week amid Congressional efforts to penalize the Chinese for currency policies that lawmakers say help widen the trade gap.
``Big deficits are probably here to stay,'' Elisabeth Denison, an economist at Dresdner Kleinwort Wasserstein in New York, said before the report. ``Imports are so much larger than exports it will be very difficult for the deficit to improve.''
Economists expected the deficit to narrow to $67.5 billion for the month compared with a previously reported $68.5 billion gap in January, according to the median estimate of 64 forecasts in a Bloomberg News survey. The estimates ranged from $65.5 billion to $72 billion.
Drop in Imports
Because the U.S. exports only two-thirds as much as it buys abroad, exports have to grow almost twice as fast just to stabilize the trade deficit.
Imports fell to $178.7 billion in February, reflecting lower demand for motor vehicles and aircraft. Even with the decline, both imports and exports were still the second-highest on record.
The U.S. deficit in petroleum trade, adjusted for seasonal variations, widened to $22.6 billion from $22.5 billion in January. The gap may have worsened in March. The price of crude oil futures on the New York Mercantile Exchange rose to $62.97 a barrel last month, compared with $61.93 a barrel in February. Oil futures closed at $68.98 a barrel yesterday.
The trade deficit with China narrowed to $13.8 billion in February, the smallest since March 2005, from $17.9 billion in January. In the first two months of the year, the gap reached $31.8 billion, compared with $29.1 billion at the same point last year.
China's March Surplus
The Chinese export juggernaut returned in force last month after the New Year holiday. China's trade surplus widened to $11.2 billion in March, the second-highest on record, according to figures released yesterday. Trade with the U.S. accounted for almost all of the gap. China's surplus with the U.S. widened 39 percent last month to $11 billion from $7.9 billion, China's customs bureau said today.
Hu is scheduled to meet with Bush in Washington on April 20 to talk about issues including trade relations. The talks will have ``a wide agenda,'' Bush said this week.
China made several concessions to U.S. demands yesterday, agreeing to start the process to lift its ban on U.S. beef imports, open up its mobile phone and medical devices market and crack down on software and music piracy. Chinese Vice Premier Wu Yi, U.S. Trade Representative Rob Portman and U.S. Commerce Secretary Carlos Gutierrez announced the agreement after a daylong summit in Washington.
``We believe that the way to address the deficit is by encouraging our exports, and not by creating barriers that will impact imports,'' Gutierrez said.
Boeing Order
Boeing Co., the world's second-largest commercial aircraft maker, signed an order agreement yesterday with the Chinese government for 80 airliners to be divided among various carriers, Wu said.
``To promote the China-U.S. economic cooperation requires the concerted efforts of both sides,'' Wu said. ``It is unfair to ascribe the U.S. trade deficit issue to China only.''
Lawmakers such as Senator Charles Schumer, a New York Democrat, say China is artificially keeping its currency weak to make its goods inexpensive and stimulate foreign demand. He and South Carolina Republican Lindsey Graham have proposed legislation to impose a 27.5 percent tariff on Chinese goods if the currency isn't allowed to strengthen.
``There's been chatter instead of action about China,'' Representative Sander Levin, a Michigan Democrat, said yesterday. ``People have gone over there, but we haven't used the instruments available'' to put pressure on the Chinese, said Levin, a member of the House Ways and Means Committee, which oversees trade policy.
Imports of autos and parts fell 5.8 percent in February to $21.4 billion. Imports of commercial aircraft slumped by $258 million to $827 million.
Exports Decline
Exports fell to $113 billion in February from $114.3 billion the previous month. The decline was led by capital goods, such as computers, and by foods and beverages.
While imports are likely to keep growing, an acceleration in growth in Japan and Europe will benefit U.S. exporters and prevent the deficit from ballooning, economists said.
``The good news is demand around the world and the United States is strong,'' Daniel R. DiMicco, chief executive officer of Charlotte, North Carolina-based Nucor Corp., said in an April 5 interview. ``The trend over the next 10 to 15 years should be bullish for commodities.'' Nucor is the second-largest U.S. steel producer by sales.
Boeing delivered 20 aircraft to foreign buyers in February, the most in six months.
``We are seeing some very strong global growth trends so that should prop up exports,'' Haseeb Ahmed, an economist at JPMorgan Chase Bank in New York, said before the report.
The deficit subtracted 0.9 percentage point from growth in the first quarter and will lower growth for the year by 0.5 percentage point, according to a forecast from economists at Lehman Brothers Inc.
The U.S. economy, the world's largest, will grow 3.3 percent this quarter, according to the median estimate of economists surveyed by Bloomberg News this month. Growth last quarter probably accelerated to 4.7 percent from 1.7 percent in the last three months of 2005, according to last month's survey.
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