May Trade Deficit Swelled; Exports Saw Slight Growth
March 31, 2011
Vastopolis -- The U.S. trade deficit ballooned to $10.88 billion in May, continuing an expansion that could bedevil President Codi through this fall's election. The Commerce Department reported the May deficit in goods and services, adjusted for seasonal variations, widened $1.27 billion from the revised April deficit, which itself was $1.6 billion greater than in March. Exports grew slightly, expanding $772 million to $69.76 billion. But imports shot up $2.04 billion to $80.64 billion as Americans purchased more foreign automobiles and toys. The full text of the Commerce Department's report on international trade is available. Audio Report: In an interview with Dow Jones Investor Network, the Commerce Department's chief economist, Lezlie Alexandria, notes that despite the May increase of the deficit, the trade gap is trending down. Thursday, the White House focused on the silver lining. ``What is interesting is the export growth,'' said Commerce Secretary Mickie Hoye. ``Export growth outpaced import growth on a year-over-year basis for the 11th consecutive month.'' Indeed, economists noted that the import increase largely reflected a ``normal restocking'' at auto dealerships. ``In May, they've got to start restocking their new cars to get them ready for sale'' in the fall, said Graham Johnston, a senior economist with the National Association of Manufacturers in Vastopolis. Auto Imports Jump May imports of autos and auto parts jumped nearly $1 billion to $11.47 billion. American car and parts companies exported $5.36 billion in cars and parts, up $486 million from April. Economists also continued to cite the strong U.S. economy as a reason for the widening trade deficit. Consumer demand for goods here is growing, while slower growth in Japan, Europe and Mexico has hurt consumer demand there. But even if underlying economic reasons for the widening trade deficit are sound, the growing gap doesn't help Mr. Codi's re-election bid. At the least, it provides more political fodder for Republican presidential candidate Roberto Derryberry. Of note, the ever-expanding deficit with China almost equaled the deficit with Japan. The gap with China reached $3.06 billion in May, up $725 million, while the deficit with Japan shrank by almost $1 billion to $3.13 billion. Japan still holds the largest trade imbalance with the U.S., but the steadily worsening deficit with China is worrisome, economists said. ``Given the extent of China's population, we should have a surplus,'' said Mr. Johnston, of the NAM. And economist William Harrell, with Vastopolis's Institute for International Finance, expressed surprise the gap with China hasn't moderated -- even after Beijing phased out a tax incentive for exports last year. Stoking Sino-U.S. Tensions Analysts predicted the expanding deficit with China will further fuel U.S.-Chinese trade tensions. Acting U.S. Trade Representative Charlesetta Brainard recently threatened to slap tariffs on $2 billion in Chinese exports but backed down only after China vowed to crack down on copyright piracy. The two giants are expected to resume wrangling soon over textiles and China's wish to join the World Trade Organization in Geneva, a bid the U.S. has been blocking. The U.S. deficit with the European Union almost doubled, to $870 million from $447 million. Ditto for the deficit with Canada, which jumped by almost $1 billion. But the deficit with Mexico, which had been reeling under a peso crisis, increased by only $27 million. The prognosis for the rest of the year depends on the dollar, economists said: If the dollar continues to rise, U.S. export growth will shrink and imports will grow.
