Trade deficit narrows slightly in September

WASHINGTON (AP) - The U.S. trade deficit narrowed slightly in September but was still running well above last year's gap, adding urgency to Obama administration calls for other countries to do more to rebalance global growth.

The Commerce Department reported Wednesday that the deficit fell 5.3 percent to $44 billion in September, as imports retreated slightly while exports edged higher, helped by rising sales of American airplanes and industrial machinery. The deficit was at $46.5 billion in August.

But even with the slight improvement in September, the U.S. deficit through the first nine months of this year is 40 percent higher than a year ago. The soaring trade deficits are coming at a time of high unemployment in the United States and have added pressure on Washington to do more to boost U.S. jobs.

"It is striking that despite the weak economic recovery, the trade deficit has all but doubled since the recession ended," said Paul Dales, U.S. economist at Capital Economics.

For September, U.S. exports of goods and services edged up 0.3 percent to $154.1 billion, the highest level in two years. Imports, which had been surging in recent months, fell by 1 percent to $198.1 billion. The trade deficit is the gap between exports and imports.

The politically sensitive deficit with China, the country with the largest trade imbalance with the United States, dipped slightly to $27.8 billion in September. It had hit a monthly record of $28 billion in August.

Through the first nine months of this year, the trade gap with China is running 21 percent higher than in 2009 and is on track to match the all-time annual record set in 2008.

China reported Wednesday that its trade surplus with the world surged in October to the second-highest level this year. That was expected to add to pressure on Beijing to ease currency controls that American manufacturers contend keep the Chinese yuan undervalued by as much as 40 percent against the dollar.

The $27.1 billion Chinese surplus in October was up sharply from a $16.9 billion surplus in September and was just below the high for the year - a $28.7 billion July surplus.

Through September, the overall U.S. trade deficit is running significantly higher than the pace set in 2009 when a deep recession had cut sharply into demand by U.S. consumers and businesses for foreign products.

The rising U.S. trade deficit has added to pressure on the administration and Congress to take action to protect American jobs from foreign competition. Much of the U.S. unhappiness has been aimed at China.

President Barack Obama arrived in South Korea on Wednesday for a meeting of the Group of 20 major industrial and emerging economies. The administration is pushing for the other countries to agree to set targets for current account trade balances as a way to rebalance growth. The administration has argued that surplus countries such as China, Germany and Japan need to do more to boost their domestic growth and not rely on exports to the United States.

But Obama found himself having to defend the decision announced last week by the Federal Reserve to pump an additional $600 billion into the U.S. banking system to try to jump-start a sluggish U.S. economy.

That action has triggered criticism from other countries who see it as an effort by the United States to weaken the value of the dollar to gain trade advantages. It renewed fears about the possible outbreak of a currency war in which countries will try to devalue their currencies as a way to bolster exports and offset weak domestic growth.

In a letter to the other G-20 leaders, Obama said, "When all nations do their part - emerging no less than advanced, surplus no less than deficit - we all benefit from higher growth."

A widening trade deficit has been a big drag on the economy over the past six months, subtracting 3.5 percentage points from overall growth, as measured by the gross domestic product, in the second quarter and 2 percentage points in the third quarter when the GDP grew by just 1.7 percent.

At a time of high unemployment, the widening trade deficit with China has increased calls for a crackdown on what critics see as China's unfair trade practices. In September, the U.S. House passed legislation that would impose stiff trade sanctions on countries such as China found to be manipulating their currencies to gain trade advantages, and attacks on China played a prominent role in a number of congressional races this fall.

In September, the U.S. deficit with Canada, America's biggest trading partner, dropped to $1.1 billion, down 51.2 percent from August, while the deficit with the European Union fell 25.5 percent to $6.1 billion. The deficit with Japan was down 13.5 percent to $5 billion.

The small rise in exports was led by an increase in sales of capital goods, such as aircraft and industrial machinery, which offset a drop in exports of U.S. made autos and auto parts.

The drop in imports reflected a decline in imports of consumer goods such as clothing, toys and electronics products and foreign-made autos.