America’s trade shortfall with the rest of the world became a little smaller during February, as US consumers bought fewer foreign-made cars and televisions and the politically sensitive deficit with China narrowed markedly, just in time for China President Hu Jintao’s much-anticipated visit to Washington.
The Commerce Department reported the US deficit in international trade of goods and services shrank 4.1% to $65.74 billion from $68.69 billion in January. But many of the forces that led the trade gap to tighten up are likely to be short-lived. Though the bilateral deficit with China fell nearly 23%, China already has announced a huge overall surplus for March. Further, the tab for foreign petroleum lightened to $20.74 billion from $22.58 billion in January; that’s because although the price of crude oil actually rose month-over-month, nearly 12 million fewer barrels of the stuff reached American ports. Since February, however, oil prices have climbed steadily, suggesting the US foreign-oil bill could expand in the months ahead even if demand remains constrained.
Meanwhile, US shipments abroad decreased 1.2%. Global Insight economist Nigel Gault wrote in a note that even with February’s decline, exports are 11.5% higher than they were a year ago, and he thinks improving growth in Europe and Japan will keep export growth strong. But others are more concerned. Gregory L. Miller, chief economist at SunTrust Banks, worries weaker exports “could be an indicator of global slowing.”
Economists have been counting on improved global growth to help whittle down the trade deficit by increasing foreign demand for US goods and services. But unless overseas economies find a lot more momentum, the deficit is likely to keep widening and widening. That could eventually push down the value of the dollar, pinching the value of US securities and slowing economic growth. (Dow Jones & Company, Inc.)