- The Washington Times - Thursday, February 12, 2009

The U.S. trade deficit reached its lowest monthly level in nearly six years in December as soaring unemployment, plummeting home values and plunging oil prices reduced consumer spending on imported goods.

As American consumers were spending less on imported autos, oil and clothing, foreign buyers were importing fewer American goods, too. U.S. merchandise exports collapsed by nearly 9 percent in December, the Commerce Department reported.

The net result was that the monthly trade deficit, which reached $67 billion as recently as July 2006, fell below $40 billion in December. It was the fifth month in a row that U.S. exports and imports fell.

“The clear message is that global trade activity has collapsed, as the world economy sinks deeper into recession,” said Nigel Gault, chief U.S. economist for IHS Global Insight.

Since the spring of 2007, America’s improving trade sector had been one bright spot in a deteriorating economy. That may change.

“Net exports have propped up [economic growth] over the past year, but the party is over,” said Tim Quinlan, an economic analyst at Wachovia Economics Group. “Global growth has turned to global contraction, and trade will not add significantly to gross domestic product in 2009.”

The United States racked up a record $266.3 billion merchandise trade deficit with China last year, although December’s gap actually declined.

Other big deficits in 2008 included $107 billion with the European Union, $74 billion with Canada, $73 billion with Japan and $64 billion with Mexico.

The petroleum deficit, which includes crude oil and gasoline, reached $386 billion last year, representing a 32 percent increase over 2007. After peaking at close to $150 last July, the average price for imported crude oil collapsed below $50 per barrel in December.

For all of 2008, the U.S. trade deficit in goods and services totaled $677 billion, down from $700 billion in 2007 and $753 billion in 2006.

“A trade policy that can shrink the deficit only when the economy is collapsing is still a failure,” said Alan Tonelson, a research fellow at the United States Business and Industry Council. “A country careening toward ‘catastrophe,’ in President Obama’s words, and desperately needing to produce its way out, can no longer afford business-as-usual in trade.”

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