US trade deficit soars to record


Richard Moore

Original source URL:

US trade deficit soars to record

The US current account deficit, the nation's broadest measure of trade, reached 
a record high in 2005.

According to the Commerce Department, the shortfall, which includes trade 
figures as well as money flows, surged 20% to $804.9bn ((Pounds) 463bn) last 

The deficit was 6.4% of the total value of the US economy, the world's largest.

Analysts say that the imbalance in the current account may prompt problems, as 
investors try to limit their exposure to the US and a drop in asset values.

Chinese deficit

While the US is posting steady and healthy economic growth, there is a worry 
that problems are being stored up.

    If our economic relationship is to stay afloat, China needs
    to lighten the load by carrying out reforms
    Carlos Gutierrez

Analysts have pointed to a bubble in the housing market, reluctance among 
consumers to spend, the threat of a weaker dollar and an inability to compete 
with lower-cost Asian manufacturers.

"The current account deficit has grown to a point where it arguably cannot be 
corrected by US action alone," said Michael Woolfolk, senior currency strategist
at the Bank of New York.

Many US politicians blame the growing trade deficit with China for broader 
economic problems, arguing that China has deliberately suppressed the value of 
its currency to sell goods abroad cheaply.

Political unease

Speaking on Tuesday, US Commerce Secretary Carlos Gutierrez said that if China 
did not take action on currency reform it would encourage those in the US 
seeking to put up "protectionist barriers".

Support for legislation which would slap tariffs of more than 25% on certain 
Chinese goods if Beijing does not further revalue the yuan is thought to be 
gaining support among sections of Congress.

Pressure is growing for China to act ahead of a visit by Chinese president Hu 
Jintao to the US next month.

"If our economic relationship is to stay afloat, China needs to lighten the load
by carrying out reforms and delivering results," Mr Gutierrez said.

Story from BBC NEWS:
Published: 2006/03/14 21:26:40 GMT


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