The U.S. trade deficit widened to $54 billion in August, the second-highest in a string of record monthly trade gaps that shows no sign of abating.
Imports surged to a record $150.1 billion, in large part because of higher crude oil prices, the Commerce Department reported. At the same time, exports barely budged from the previous month, totaling $96 billion.
The result was the third straight monthly trade gap above $50 billion. At the current rate, the trade deficit for the full year will total $590 billion, well above last year's record of $496 billion.
The report shows "that it's an almost intractable problem to make much progress in reducing our trade deficit," said Stuart G. Hoffman, chief economist at PNC Financial Services Group Inc. in Pittsburgh. In a memo to clients, economists at Goldman Sachs wrote that the August figure "serves as a reminder of the fundamental imbalances in the U.S. economy."
The importance of the trade gap is a matter of controversy among economists. Bush administration officials have long dismissed worries as overblown, observing that the large and steadily growing U.S. economy naturally pulls in imports worth more than its exporters can sell in less wealthy or slower-growing markets abroad.
But many analysts worry that the wider the trade deficit gets, the more dangerously dependent the United States becomes on the money that foreigners are effectively lending Americans to buy imported goods. Ultimately, many predict, the value of the U.S. dollar will have to fall substantially further than it already has to make U.S. goods more competitive in world markets and help bring imports and exports into line. In the worst case, foreign investors might decide to dump their vast holdings of dollars, U.S. Treasury bonds and other assets en masse, potentially causing a worldwide slump.
"So far we've lived with this trade deficit because we have this synergy," Hoffman said. "Foreign investors seem quite content to invest the dollars they're receiving from the goods they're shipping to us into our securities. The things you hear about, that there could be an adverse impact on the dollar or the bond markets, have worked out at least to this point. That's not to say they always will."
Democrats seized on yesterday's report to buttress their claim that the White House has failed to mount an aggressive trade policy. They highlighted the U.S. bilateral deficit with China, which reached a record $99 billion in the first eight months of the year, 28 percent above the same period last year.
"When it comes to enforcing trade agreements, standing up for U.S. workers and creating opportunities for American companies, this White House has been a wet noodle," said Phil Singer, a spokesman for the presidential campaign of Sen. John F. Kerry (D-Mass.), in an e-mailed statement.
Administration officials have hotly disputed such criticism. In a trade debate on Oct. 1, Josette Shiner, the deputy U.S. trade representative, cited recently wrung concessions from China and said President Bush revived a trade agenda "that was dead in the water" by launching a new round of global trade talks and striking free-trade deals with a dozen countries.
The National Association of Manufacturers said yesterday's report was "encouraging news" because it showed that exports of manufactured goods are up 12 percent from a year ago as the dollar continued to decline from its 2002 peak.
"The increase in the overall trade deficit is largely a function of oil prices, which we hope is a temporary phenomenon," said Michael Baroody, the NAM's executive vice president. "The real story is that U.S. manufacturers are rapidly expanding their sales overseas, thanks in large measure to the Bush administration's effective work on the dollar."
But other analysts put the data in much bleaker perspective, noting that overall exports of goods and services have been stagnant recently.
"The really bad news is that exports are flat and have been for five or six months now," said Nariman Behravesh, chief economist at Global Insight, an economic forecasting firm. "We've been looking forward in the United States to some export-led growth because of the weaker dollar and stronger growth overseas, but that doesn't seem to be panning out."
Furthermore, the trade gap is almost certain to widen further in coming months, economists said, because oil prices have risen since August. The price of oil closed yesterday at $54.76 on the New York Mercantile Exchange.