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US trade gap narrows in June as soft dollar drives exports
Posted: 15 August 2007 0019 hrs

http://www.channelnewsasia.com/stories/afp_world_business/view/293985/1/.html


WASHINGTON : The US trade deficit narrowed 1.7 percent to US$58.1 billion in June as exports soared to a record high on the wings of a weak dollar, a Commerce Department report showed on Tuesday.

The June trade gap was the smallest since February and below economists' consensus forecast that it would widen to US$61 billion.

The improved performance in June came despite surging oil prices and in the context of a soft dollar, which makes US exports comparatively cheaper to buy.

However, Americans showed no signs of a waning appetite for cheap Chinese-made goods, despite protests from some US lawmakers that China is keeping its yuan currency undervalued to maintain an unfair trade advantage.

The gap with China, which holds the lion's share of American imports, expanded to a record US$21.16 billion in June from US$20.02 billion in May, the Commerce Department said.

Imports of crude oil rose to US$19.6 billion, the highest level since September 2006 when the value stood at US$19.7 billion.

The June unit price was US$60.95 per barrel, up from US$59.36 in May. That was the highest price since September 2006, when crude fetched US$62.40 a barrel.

"Trade with China contributes nearly as much to the trade deficit as petroleum, making the yuan-dollar exchange rate as important as the price of oil in determining the size of the trade deficit and the outlook for US GDP (gross domestic product) and jobs growth," said Peter Morici, an economics professor at the University of Maryland and frequent critic of President George W. Bush's trade policy with China.

"The damage grows larger each month, as the Bush administration dallies and ignores the corrosive consequences of the trade deficit," he said.

The head of a manufacturing trade coalition also criticised the latest record-high value of Chinese import and accused the Asian giant of cheating trade rules.

"The US trade deficit with China is out of control. While the overall US trade deficit is falling due to a weak dollar and other economic factors, the US trade deficit with China keeps growing," said Auggie Tantillo, executive director of the American Manufacturing Trade Action Coalition.

"Because China cheats by heavily subsidising its industry and exports, the US trade deficit with China only will keep rising," he warned.

The Commerce Department said US exports to China rose to a record high of US$5.9 billion.

The department revised the May trade deficit slightly lower, to US$59.2 billion, from an initial estimate of US$60 billion.

The latest figures brought the overall trade gap for the first six months of the year to US$352.7 billion, sharply below the US$382.3 billion registered for the same period in 2006.

That downward trend puts the United States on track for a yearly decline in the trade deficit, which would be the first in six years.

Exports were the main factor driving the deficit down in June, rising 1.5 percent from the prior month to a record US$134.5 billion.

Supported by the dollar's weakness, Americans sold record amounts of industrial supplies, automobiles, capital goods and food products, the Commerce Department said. Exports of consumer goods declined.

Imports rose 0.5 percent to US$192.7 billion, another record high. The increase was led by imports of automobiles and capital goods. - AFP/de