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Oil Imports Responsible For Rise In Trade Deficit

Almost two-thirds of the decline in the deficit reflected a 17.6 percent jump in oil imports, which climbed to $24.6 billion, the highest level in six months, Commerce Dept. figures show.

WASHINGTON (AP) - The trade deficit rose to the highest level in six months as a big jump in oil imports offset a narrowing of the politically sensitive deficit with China.
The gap between what the United States imports and what it sells to the rest of the world rose to $63.9 billion in March, up 10.4 percent from the February level, the Commerce Department reported Thursday.
Almost two-thirds of the deterioration in the deficit reflected a 17.6 percent jump in oil imports, which climbed to $24.6 billion, the highest level in six months.
The imbalance with China fell by 6.4 percent to $17.2 billion in March, the smallest gap in 10 months as U.S. exports to China set a record. Still, for the first three months of 2007, the deficit with China ran 20.4 percent higher than the same period a year ago.
The imbalance with China hit an all-time high of $232.5 billion in 2006.
So far this year, the overall U.S. trade deficit is running at an annual rate of $722.6 billion, slightly below the $765.3 billion deficit set in 2006, the fifth consecutive record deficit.
Critics of President Bush's trade policies contend the administration has not done enough to protect American workers from unfair foreign competition from low-wage countries such as China. Democrats used the soaring trade deficits and the loss of 3 million manufacturing jobs since Bush took office in their successful effort last year to regain control of both the House and Senate.
Worried about a protectionist backlash in this country, the administration has toughened its approach to China, but the effort may not be enough to satisfy lawmakers who are promoting legislation to penalize China for such practices as undervaluing its currency to gain trade advantages.
''Higher monthly trade deficit numbers pour more fuel on the fire burning under this administration to really do something on trade policy, especially when it comes to trade with China,'' said Sen. Charles Schumer, D-N.Y.
Top officials from the U.S. and China are to meet in Washington on May 23-24 for a second round of talks on various economic issues. Treasury Secretary Henry Paulson has said the administration is looking for ''signposts'' of short-term progress in such areas as environmental cleanup and increasing commercial flights between the two countries.
Commerce Secretary Carlos Gutierrez said Thursday the Chinese will meet behind closed-doors with key members of Congress during their Washington trip. ''We want the members of the Chinese delegation to get a better sense of how our Congress works,'' Gutierrez said in an interview with The Associated Press.
Wall Street staged a sharp retreat on Thursday as investors reflected on the weak trade numbers and a report from the nation's retailers that their sales had been disappointing in April as consumers worried about rising gasoline prices and a continued slump in the housing market.
The Dow Jones industrial average fell 147.74 points to close at 13,215.13, the biggest one-day drop since a 242-point plunge on March 13. The downturn followed a rise Wednesday that pushed the Dow to its 21st record close of the year and analysts said the market was poised to give back some of those gains.
Growth of the overall economy, as measured by the gross domestic product, slowed to a lackluster rate of just 1.3 percent in the January-March quarter and private economists said the new trade number would end up shaving that performance even more, perhaps trimming growth to an extremely anemic 0.7 percent.
The $63.9 billion overall deficit in March was the largest trade gap since a deficit of $64.6 billion in September. Exports rose 1.8 percent to $126.2 billion while imports rose a faster 4.5 percent to $190.1 billion.
The increase in exports reflected increased shipments of U.S. autos, consumer goods and oilfield drilling equipment. This helped to offset declines in sales of civilian aircraft, computers and machine tools.
The increase in imports reflected the big jump in America's foreign oil bill, which reflected a higher volume of shipments and a rise in the average price of a barrel of crude to $53, up from $50.71 in February.
The deficit with Canada, America's biggest trading partner, rose by 21.7 percent to $5.7 billion in March while the deficit with the European Union increased by 21.3 percent to $7.7 billion even though U.S. exports to both areas set records.
Some analysts saw some hopeful signs in the March trade report in the big gains in exports, which they attributed in part to the fact that the dollar has declined by about 17 percent against many major trading partners since 2002, making American goods cheaper in foreign markets.
David Huether, chief economist for the National Association of Manufacturers, said he believed the dollar realignment and strengthening of overseas economies should accelerate the growth of U.S. exports and result in a narrowing trade deficit for the entire year.
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