Trade deficit increases to $40.4 billion in March
AP Economics Writer
WASHINGTON – The U.S. trade deficit rose to a 15-month high as rising oil prices pushed crude oil imports to the highest level since the fall of 2008, offsetting another strong gain in exports. The larger deficit is evidence of a rebounding U.S. economy.
Analysts expect this year’s deficit to be up significantly from 2009, when it hit an eight-year low. But U.S. exports should keep growing, providing a major source of strength from American manufacturers, and will only be marginally affected by the European debt crisis.
The Commerce Depart-ment reported Wednesday that the trade deficit rose
2.5 percent to $40.4 billion
in March compared to the February imbalance. It was the largest monthly trade deficit since December 2008.
Exports of goods and services were up 3.2 percent to $147.87 billion, the highest level since October 2008. Imports were up 3.1 percent to $188.3 billion.
U.S. manufacturers will continue to get a boost from rising demand for their products, economists predicted. Their sales are being helped by a rebound in the global economy and declines in the value of the dollar against other major currencies.
The dollar has strengthened this year against the euro, the common currency of 16 European countries. That is largely the result of the debt crisis in Greece that could spread to other European countries, such as Spain and Portugal. The dollar is now about 15 percent stronger against the euro than it was in December.
Economists said this will dampen U.S. export sales to Europe and increase demand for European products.
But the changes had not been significant enough to derail their expectations for steady gains in exports this year. That should continue as long as the debt crisis doesn’t worsen and threaten to derail Europe’s recovery.
“Greece is a small economy. The big countries, Germany and France, are still doing okay,” said David Wyss, chief economist at Standard & Poor’s in New York.
Wyss said export growth would add to the overall economy this year, providing a key boost to American manufacturers. But Wyss and other economists said that outlook could prove too optimistic if the debt crisis in Europe intensifies.
Greece, which uses the euro, accounts for only 0.2 percent of U.S. exports. But the 16 European nations that use the euro account for 15 percent of U.S. exports.
So far this year, the U.S. deficit is running at an annual rate of $467.2 billion, 23.4 percent higher than last year’s imbalance of $378.6 billion.
The rise in exports appeared to please Wall Street. The Dow Jones industrial average was up about 130 points in afternoon trading.
For March, the rise in exports reflected increased sales of American farm products, led by gains in sales of corn, dairy products and rice. Sales of heavy machinery from electrical generators to earth-moving equipment also posted big increases as did sales of semiconductors.
The increase in imports was led by a 25.5 percent jump in crude oil shipments, which rose to $22.3 billion March, the highest level since October 2008. That increase reflected higher volume and higher prices. The average price for a barrel of crude oil rose to $74.32, up from $72.92 in February.
Prices have been falling since oil hit $87.15 a barrel in early May. The debt crisis in Europe has raised concerns about the durability of the global economic recovery. In trading Wednesday, oil dipped to near $76 a barrel.
The deficit with China rose 2.4 percent to $16.9 billion in March, the highest level since January and the largest trade gap with any country. The Obama administration is facing growing political pressure to impose trade sanctions on China if Beijing doesn’t allow its currency to rise in value against the dollar.
Treasury Secretary Timothy Geithner raised hopes for a change in monetary policy when he stopped in Beijing last month to talk with Chinese economic officials on his way back from India. But Chinese President Hu Jintao, who discussed the issue with President Barack Obama during a trip to Washington last month, said China’s decision on the currency “won’t be advanced by any foreign pressure.”
American manufacturing companies that compete against the Chinese are pressing for a tougher trade policy. They say America’s trade deficit with China has cost 2.4 million manufacturing jobs at a time when the jobless rate in this country is 9.9 percent. They contend that Beijing’s currency manipulation and other unfair trade practices have made Chinese products cheaper in America at the expense of U.S.-made goods, while making American-made products more expensive in China.
Geithner is expected to raise the currency issue when he and Secretary of State Hillary Clinton go to China for two days of high-level talks later this month.
The deficit with the 27-nation European Union rose to $7.1 billion in March, a jump of 32.7 percent. Imports from Europe rose faster than U.S. exports to the EU.
The deficit with Canada, America’s largest trading partner, fell by 15.8 percent to $2.3 billion. The imbalance with Mexico rose 26.7 percent to $6 billion as imports from Mexico hit an all-time high.