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U.S. Trade Deficit Dips on Export Expansion

Posted on: Wednesday, 12 September 2007, 06:00 CDT

By David J. Lynch

WASHINGTON -- Steady export growth and a slowing U.S. economy helped narrow slightly the monthly trade deficit in July, according to the Commerce Department.

July's trade deficit was $59.4 billion, $200 million less than the previous month. Exports for the first seven months of this year of $137.7 billion rose 11.4% over the first seven months of 2006, while imports of $196.9 billion increased 4.6%.

"Exports are growing much faster than our imports. That will help to cushion the blow from housing," says Nariman Behravesh, chief economist for the forecasting firm Global Insight.

Trade with China remained far out of balance in July, as imports from the Asian giant exceeded U.S. exports by $23.8 billion -- a 12.5% increase over June's deficit. For the month, China topped Canada for the first time as the leading source of U.S. imports.

So far this year, the U.S. trade deficit with China stands at $141.3 billion, 16.4% above the figure for the comparable period last year. Still, only Canada, Mexico and Japan have bought more from the U.S. this year than China.

Net exports are expected to account for about one-quarter of the economy's growth over the next year, he says. A weaker dollar and growth in Europe and Japan are expected to result in continued strength in orders from abroad.

The Bush administration, fighting for congressional approval of pending trade deals with Peru, Colombia, Panama and South Korea, embraced the new data.

"The current strong export expansion is critical to supporting the U.S. economy right now. (Export growth) has accounted for 40% of U.S. economic growth over the last four quarters," says Susan Schwab, Bush's chief trade negotiator.

But with a troubled housing industry weighing on the economy, trade will not be an economic cure-all, says economist Jay Bryson of Wachovia. "If consumer spending goes into the tank, net exports are not going to bail us out," he says.

The Commerce Department report came as a key Senate committee considered the proposed Peru trade deal, the first agreement reflecting tougher labor and environmental standards long urged by Democrats.

At Tuesday's hearing, Senate Finance Committee Chairman Max Baucus, D-Mont., promised to move quickly toward full Senate approval. (c) Copyright 2005 USA TODAY, a division of Gannett Co. Inc.

Source: USA TODAY

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