Oil prices widen U.S. trade deficit in April

WASHINGTON — The U.S. trade deficit rose in April after two months of rare declines, pushed higher by surging oil prices and a flood of imported furniture, televisions and toys from China.

The gap between what the United States sells abroad and what it imports rose to $63.4 billion in April, the Commerce Department reported today. That was a 2.5 percent increase from the March deficit of $61.9 billion, but it was significantly lower than the $65 billion trade gap that Wall Street had been expecting.

The deterioration in the deficit was almost all accounted for by a $1.44 billion increase in America's foreign oil bill, which rose to $23.8 billion. That reflected a big jump in crude oil prices, which hit an all-time high of $75.17 per barrel in late April.

Analysts said even with this lower-than-expected increase in the April deficit, trade will still act as a drag on the economy in the current quarter.

Ian Shepherdson, chief U.S. economist at High Frequency Economics, predicted the trade deficit would subtract about one-half percentage point from overall economic growth in the April-June period. He predicted higher trade deficits in coming months reflecting soaring global oil prices.

The small increase in the April deficit reflected a 0.7 percent rise in imports, which climbed to $179.1 billion, the second highest level on record. In addition to a higher oil bill, imports of autos and auto parts were up and shipments of consumer goods from China also rose. That helped to push America's total deficit with China to $17 billion in April, up 9.4 percent from March but still below the all-time monthly high of $20.4 billion set last October.

U.S. exports of goods and services slipped 0.2 percent to $115.7 billion, just slightly below the all-time high set in October. The decline was led by a big drop in commercial aircraft shipments, a volatile category that had been posting huge gains.

The trade deficit actually fell in both February and March after hitting an all-time high of $66.2 billion in January. But even with two months of improvement, the deficit so far this year is running at an annual rate of $762.5 billion, 6.4 percent higher than the record of $716.7 billion set for all of 2005.

The deficit from last year was revised down from an earlier estimate of $723.6 billion, reflecting annual benchmark revisions that increased America's surplus in services based on more complete data.

Analysts believe the deficit will set another record this year, although they also think the pace of deterioration is slowing after huge increases in recent years.

Critics of President Bush point to the soaring trade deficits to bolster their argument that the administration's free trade policies are not working and have contributed to a loss of nearly 3 million manufacturing jobs since Bush took office.

The deficits have spawned rising protectionist sentiment in Congress where many lawmakers are pushing for legislation that would raise trade barriers in this country as a way to protect American workers from what they see as unfair foreign competition. Much of their ire has been aimed at China, with which the United States suffered a deficit of $202 billion last year.

In an effort to highlight the trade gap with China, the AFL-CIO on Thursday filed a petition asking the administration to file an unfair trade case against China on the grounds the country is hurting the wages of American workers by violating workers' rights in China to keep wages in that country extremely low.

The deficit with Japan rose by 2.8 percent in April to $7.8 billion. The deficit with Canada rose by 16.3 percent to $6.1 billion in April while the imbalance with Mexico fell by 9.3 percent to $4.9 billion.

America's deficit with the 25-nation European Union declined by 7.2 percent in April to $9.4 billion.