Imports fell faster than exports, shrinking the gap by 9.7 percent to $36 billion, the Commerce Department said today in Washington. Excluding petroleum, the deficit was little changed at $21.3 billion.
The credit crunch gripping the financial system is causing demand throughout the world to slump as consumers and businesses pull back. What’s shaping up to be the biggest plunge in global trade in 80 years is adding to pressure on the Obama administration to rework international agreements and include protections for U.S. workers and the environment.
The trade gap with China increased to $20.6 billion from $19.9 billion in the prior month as U.S. exports to the nation dropped faster than imports. China has used some of the dollars it accumulates through trade surpluses with the U.S. to purchase American government debt, making it the largest owner of Treasuries.
The narrower gap is not good news for the U.S. economy because it mainly reflected the drop in petroleum prices. The numbers used to calculate gross domestic product, which eliminate the influence of prices, showed the trade deficit widened to $44 billion, the most since October.
Imports slumped 6.7 percent to $160.9 billion, the fewest since March 2005, paced by a $4.3 billion plunge in purchases of crude oil. Demand for foreign automobiles dropped by $3.3 billion.
The deficit with OPEC dropped to $3.9 billion, the smallest since November 2003, and the gap with Japan shrank to the lowest level since January 1998, as U.S. imports fell to an almost 16- year low.
An even bigger concern for the U.S. economy is the slump in foreign demand for American-made goods. Exports decreased 5.7 percent to $124.9 billion, the lowest level since September 2006, as sales of automobiles, semiconductors, telecommunications gear and drilling equipment dropped, today’s report showed.
The trade gap with Canada, the U.S.’s biggest trading partner, narrowed to the lowest level since May 1999, and the deficit with Mexico was the smallest since January 2002. The shortfall with the European Union was cut in half from $7 billion in December to $3.5 billion the following month.