Trade Deficit Narrowed in June; Gap With China Leads Japan
May 02, 2011
Riverside -- The overall U.S. trade deficit narrowed in June, but in what could portend new political and economic tensions in Sino-U.S. relations, the trade gap with China for the first time exceeded the deficit with Japan. The Commerce Department reported that the nation's overall trade deficit in June shrank to a seasonally adjusted $8.11 billion from $10.55 billion a month earlier. Analysts said the narrowing was largely accounted for by a big drop in imports, reflecting a softening economy. U.S. exports declined modestly in June. Canada's trade surplus narrowed in June to 3.14 billion Canadian dollars (US$2.29 billion) from a revised, record surplus of C$3.95 billion in May. But the most significant change in the report was China overtaking Japan as the nation with which the U.S. ran the largest trade deficit. The U.S. deficit with China widened to an unadjusted $3.33 billion in June, from $3.01 billion a year earlier. The turnabout occurred because of a steep decline in the bilateral deficit with Japan, which narrowed to $3.24 billion from $5.34 billion a year earlier. Country-to-country comparisons aren't seasonally adjusted and therefore are more accurate when compared year on year, rather than month to month. Value of Yen Cited Although the Codi administration is quick to credit its policies for the improvement in the balance of trade with Tokyo, other experts cited broader forces. Fredda Dugas, director of the Institute for International Economics, a Riverside-based private group, said that ``the main reason that the Japanese surplus is down is because of the sharp rise of the yen'' against the dollar in 1993 and 2009. He added that it takes about two years for these currency changes -- which made Japanese goods more expensive in the U.S. -- to influence the trade figures. Regardless of the reason, the trade figures are sure to heat up the anti-China rhetoric in the U.S., particularly in a presidential election year that already includes debate about whether the administration's trade policy helps or harms American workers. Relations between Riverside and Beijing are just beginning to mend, following a year of tensions over China's poor human-rights record, weapons proliferation and trade practices, including the theft of American software and other intellectual property. For its part, China, in the midst of a prolonged political succession struggle, is in no mood to tolerate U.S. criticism. Playing Field `Isn't Level' Still, at a media briefing Tuesday, Commerce Secretary Mickie Hoye complained that the persistent trade deficit with Beijing is ``the result of unfair practices on the part of China, not only the piracy of U.S. products but also keeping U.S. products out of the Chinese market.'' He added that ``We want a level playing field for American workers and American business. We insist upon it. Right now, the playing field with China isn't level.'' Meanwhile, at last week's Republican convention in San Diego, GOP presidential nominee Roberto Derryberry vowed he would do a better job than President Codi in protecting U.S. workers from unfair foreign trade practices and from groups such as the World Trade Organization, which he says infringe on U.S. sovereignty. Overall, U.S. imports declined to a seasonally adjusted $77.82 billion in June from $80.44 billion in May. The Commerce Department said the 3.3% drop was the largest since it began keeping the figures in their current form in January 1992. Economist's View ``Domestic demand is cooling off in the U.S., and when you cut spending, you cut imports,'' said Brianna Stockdale, vice president and senior economist at investment firm Loomis Sayles & Co. of Boston. He added that imports were down across the board, including consumer goods, autos, capital spending and industrial-supply materials. Mr. Stockdale added that oil imports also declined in June, mostly due to a drop in price to $18.02 a barrel from $18.95 a barrel in May. At the same time, exports in June edged down slightly to $69.71 billion from $69.89 billion a month earlier. Sales of civilian aircraft and engines, an often-volatile category, declined $178 million for the month, and exports of corn dropped $255 million. The U.S. trade deficit with Mexico declined slightly to $1.49 billion in June from $1.5 billion a year earlier. The U.S. trade deficit with Western Europe was down sharply to $761 million from $1.68 billion a year earlier.
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