U.S. Trade Gap Hits Record $43.1 Billion in January

WASHINGTON (Reuters) - The U.S. trade deficit widened to a record $43.1 billion in January, as rising oil prices helped keep imports near historic highs and exports retreated despite the weaker dollar, the Commerce Department said on Wednesday.

Jon Lonski, chief economist at Moody's Investors Service (News - Websites) in New York, said the widening trade gap was "consistent with other signs of an economy that appears to be losing its footing" and therefore could weigh on stock prices.

"All in all, this is not news that might help us discount recent signs of a softer economy, especially as it relates to the labor market," Lonski added.

Pierre Ellis, senior international economist at Decision Economics in New York, said the wider-than-expected trade gap was "a bit discouraging" for investors hoping to see an improvement in the yawning current account deficit -- the widest measure of U.S. trade and investment flows -- and would also likely cut economic growth early in 2004.

"With respect to the American economy, this tends to put downward pressure on first quarter estimates of GDP," he said.

Imports dipped slightly from the record set in December, but were still the second highest ever at $132.1 billion. Imports from China posted a 6.6 percent gain, pushing the monthly trade gap with that country to $11.5 billion.

China has faced pressure from the United States to move to a flexible exchange rate because of complaints that its practice of pegging its currency at 8.28 yuan to dollar gives it an unfair advantage by artificially depressing the price of its exports.

But Chinese data released on Tuesday showed the country posted a $7.87 billion trade deficit in February, compared to a trade surplus of $680 million in February 2003, as imports jumped 77 percent from the previous year.

U.S. exports slipped slightly to $89.0 billion in January, the second consecutive monthly decline. Although the euro has borne the brunt of the weaker dollar, exports to the 15-member European Union (News - Websites) edged lower during the month. Shipments to other major destinations such as Canada, Mexico, Japan and China also were lower.

Sean Callow, currency strategist at IDEAglobal in New York, said the trade report will reinforce expectations for the dollar to continue to weaken.

"I don't think (the report) changes the big picture. Those who are bearish on the dollar over the course of the year will have their expectations reinforced. They will see this in line with that bearish view, that the dollar still has further to fall to help correct the (trade) deficit," he said.

However, the dollar lost ground only briefly before shooting up against major currencies after the new record trade deficit was reported.

Meanwhile, the Mortgage Bankers Association said U.S. applications for mortgage loans rose 1.2 percent last week as mortgage rates dropped. Economists expect low interest rates to spur more requests for loans to refinance mortgages and buy homes in coming weeks.

Oh, goody! Imports from China expanded to $11.5 billion in January, up from $9.9 billion in December! And we had a total monthly trade deficit of $43 billion dollars!

This can only mean one thing. We're all gonna be rich! Let's export more jobs so we can all be wealthy!(/amused cynicism combined with sarcasm)

I don't think the problem is with china. The problem is with us. The Chinese are importing a lot, just not from us.

The problem is with us. The Chinese are importing a lot, just not from us.

Really? I propose that you conduct a simple little experiment. Go on a shopping trip! Buy nothing but goods made entirely in the USA. Try to buy electronics...clothing...shoes...tools...appliances. You'll find very few things that we make anymore.

Unless the Chinese decide to clutter their homes with arts and crafts, there is very little they can buy that's made in the USA - just like you and me.

Now, why is that? Simple enough, really. We've exported our industrial base. We don't produce anything here because we sent it all offshore! And now we persist in digging the hole deeper and making the problem worse.

(Sigh)

We've exported our industrial base. We don't produce anything here because we sent it all offshore!

The article says the chinese ran a 8 billion dollar trade deficit in Jan. We ran a 44 billion dollar trade deficit with and economy 4 times the size.

The Chinese are importing like crazy. We don't have anything they want to buy. Like I said and you said it too, we don't make anything here anymore.

The problem lies with us.

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.