U.S. trade deficit widens

WASHINGTON — The U.S. trade deficit widened more than expected in February as a small gain in exports to the highest level in 16 months was offset by a bigger jump in imports, reflecting increased demand for consumer goods from televisions to clothing.

WASHINGTON — The U.S. trade deficit widened more than expected in February as a small gain in exports to the highest level in 16 months was offset by a bigger jump in imports, reflecting increased demand for consumer goods from televisions to clothing.

The wider deficit was a sign of a rebounding U.S. economy. Economists expect the trade deficit to rise this year but hope that expanding exports will continue to lift the fortunes of American manufacturing companies.

The U.S. Commerce Department reported Tuesday that the deficit for February increased 7.4 per cent to US$39.7 billion. That was larger than the $38.5 billion deficit economists had expected. Exports edged up 0.2 per cent while imports jumped 1.7 per cent.

The politically sensitive deficit with China fell to $16.5 billion in February, the lowest level in 11 months, but was still the biggest trade imbalance the United States has with any country.

The deficit with Canada, its largest trading partner, was US$2.8 billion the Commerce Department said.

Pressure has been building in Congress for the Obama administration to take a tougher line with China and impose trade sanctions on Chinese products unless Beijing allows its currency to rise in value against the dollar, which would boost the competitiveness of American products.

Congressional critics accuse China of unfair currency manipulation that is hurting American employment at a time when the country has lost 8.2 million jobs because of a deep recession.

The February deficit was the highest since December and followed a revised $36.95-billion imbalance in January.

In the first two months of this year, the deficit was running at an annual rate of $459.9 billion, up 21.5 per cent from the $378.6 billion imbalance recorded in 2009. That had been the smallest trade gap in eight years, reflecting the severe U.S. recession that depressed demand for imports.

While imports are expected to rise this year, analysts believe exports will grow as well, reflecting a rebound in the global economy and a weaker dollar, which helps American producers by making their products cheaper in foreign markets.

President Barack Obama last month set a goal of doubling exports within five years as a way to create two million U.S. jobs. Economists view that target as ambitious but they do think a rebounding global economy and a further decline in the dollar, especially against the Chinese yuan, would help spark demand for U.S. goods.

For February, the small 0.2 per cent rise in exports of goods and services pushed the total to $143.2 billion, the highest level since October 2008. Gains were seen in exports of autos and auto parts, industrial engines, semiconductors and civilian aircraft engines.

Imports rose a larger 1.7 per cent to $182.9 billion as imports of consumer goods rose to the highest level since October 2008. Increases were recorded in shipments of computers, televisions and other electronic appliances, toys and games and clothing. Imports of all petroleum products rose 1.6 per cent to $27.6 billion on a seasonally adjusted basis even though the number of barrels of crude oil imported fell in February to the lowest level in 11 years.

China reported last week that it registered a trade deficit with the world of $7.24 billion in March, its first trade deficit in six years. While China contended that the gap showed the country was making progress in shifting to more balanced growth, a key U.S. demand, private economists said they expected the Chinese deficits to be short-lived.

Treasury Secretary Timothy Geithner made a surprise stop in Beijing last week on his way back from India, raising speculation that the Chinese government may be moving closer to allowing further appreciation of the yuan.

U.S. manufacturers contend the yuan is undervalued against the dollar by as much as 40 per cent. They are pressuring the administration to impose trade sanctions if China doesn’t allow the yuan to appreciate against the dollar, which it had done for three years until China halted the rise in mid-2008 during the global economic crisis.

In February, the U.S. deficit with Japan rose to $4.3 billion, a gain of 28.3 per cent, while the deficit with the European Union surged by 89.9 per cent to $5.3 billion.

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