- The Washington Times - Thursday, October 13, 2005

The nation’s oil bill surged to a record in August and so did goods imported from China, pushing the U.S. trade deficit to the third-highest level ever.

The deficit rose to $59 billion, about $1.1 billion more than the previous month, the Commerce Department said yesterday. There was a big increase in export sales of commercial jetliners, but that was swamped by imports of foreign oil.

The deficit is bound to get worse because hurricane-related increases for oil are still ahead. Meanwhile, the number of people put out of work by Hurricanes Katrina and Rita climbed by 75,000 last week, the Labor Department reported. The six-week tally since Katrina stands at 438,000 hurricane-related claims.

In an encouraging sign, jobless claims outside the region affected by the hurricanes have stayed low. Total jobless claims last week fell by 2,000 to 389,000.

Claims from the hurricanes should decline in the coming weeks, but the economic fallout will linger because the storms forced the shutdown of refineries and oil platforms along the Gulf Coast. The lost production has pushed energy prices to record levels, worsening inflation, stifling consumer spending and driving up the trade deficit.

“Record crude prices usually mean record trade gaps. Nobody sees relief on the energy front anytime soon,” said Oscar Gonzalez, senior economist at John Hancock Financial Services in Boston.

Economists said this year’s trade deficit could exceed $700 billion, far above last year’s imbalance of $617.6 billion.

The U.S. deficit with China reached a monthly record of $18.5 billion in August. Imports from China to the U.S. set a record, too, reflecting a further rise in shipments of Chinese clothing and textiles. The deficit with China is 28 percent ahead of last year’s pace when it reached $162 billion, the highest level with any country.

Political pressure is increasing on the Bush administration to act. In Congress, there is wide support for legislation that would impose 27.5 percent penalty tariffs on all Chinese products unless Beijing allows its currency to rise more against the dollar.

China allowed a 2.1 percent revaluation of the Chinese yuan July 21, but analysts said that was too little to have any impact on the U.S. trade deficit.

Treasury Secretary John W. Snow visited the industrial city of Chengdu yesterday as part of a weeklong tour of China. Mr. Snow is urging the Chinese to undertake faster changes in their currency system, boost domestic demand and allow foreign competition in financial services.

Mr. Snow will be joined by Federal Reserve Chairman Alan Greenspan for discussions with the Chinese on Sunday and Monday.

The $59 billion August gap between what the U.S. sells abroad and what it imports was the third-highest and close to the all-time high of $60.4 billion set in February.

The August imbalance was driven higher by a 12.2 percent jump in crude oil imports, which hit a record of $17.16 billion. Total petroleum imports, which include refined products, also set a record at $22.6 billion in August.

The price for a barrel of crude rose to a record average price of $52.65 in August, compared with $49.03 in July.

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