US trade gap narrows despite record chasm with China

WASHINGTON (AFP) - The US trade deficit narrowed in June from the prior month, despite a politically sensitive record gap with China, as a weak dollar buoyed exports, the government said yesterday.

The trade deficit shrunk 1.7 percent to a four-month low of 58.1 billion dollars in June, the Commerce Department said. That overturned economists' consensus forecast that it would increase to 61 billion dollars.

The better than expected performance in June came despite surging oil prices and in the context of a soft dollar, which makes US exports comparatively cheaper to buy.

But Americans showed no signs of a waning appetite for inexpensive Chinese-made goods, despite protests from some US lawmakers that China is keeping its yuan currency undervalued to maintain an unfair trade advantage.

The gap with China, which holds the lion's share of American imports, expanded to a record 21.16 billion dollars in June from 20.02 billion in May, the Commerce Department said.

US exports to China rose to a record high of 5.9 billion dollars.

Meanwhile, the value of crude oil imports climbed to 19.6 billion dollars at 60.95 dollars per barrel, up from 59.36 dollars in May.

The June levels were the highest since September 2006, when Americans imported 19.7 billion dollars' worth of crude at 62.40 a barrel.

The China numbers as usual drew protests from critics who say President George W. Bush should get tougher with the Asian giant on trade.

"The damage grows larger each month, as the Bush administration dallies and ignores the corrosive consequences of the trade deficit," said Peter Morici, an economics professor at the University of Maryland.

The Bush administration yesterday, for the third time in less than a year, asked the World Trade Organization to help settle a row with China.

"The US trade deficit with China is out of control. While the overall US trade deficit is falling due to a weak dollar and other economic factors, the US trade deficit with China keeps growing," said Auggie Tantillo, executive director of the American Manufacturing Trade Action Coalition.

"Because China cheats by heavily subsidizing its industry and exports, the US trade deficit with China only will keep rising," he said.

The Commerce Department revised the May trade deficit slightly lower, to 59.2 billion dollars, from an initial estimate of 60 billion.

The latest figures brought the overall trade gap for the first six months of the year to 352.7 billion dollars, sharply below the 382.3 billion registered for the same period in 2006.

That downward trend puts the United States on track for a yearly decline in the trade deficit, which would be the first in six years.

Exports were the main factor driving the deficit down in June, rising a healthy 1.5 percent from the prior month to a record 134.5 billion dollars.

Americans sold record amounts of industrial supplies, automobiles, capital goods and food products, while exports of consumer goods declined.