Trade Deficit Falls As American Consumption Falls

WASHINGTON — The U.S. trade deficit edged down slightly in August, reflecting a drop in foreign oil from record levels. But the politically sensitive deficit with China increased as imports from that country hit an all-time high.

The Commerce Department said Friday the trade deficit declined by 3.5 percent in August to $59.1 billion. The deficit is expected to shrink even further in coming months as a severe economic slump in the U.S. depresses demand for oil and other imported goods.

America's foreign oil bill declined to $43.7 billion in August, down a record $7.3 billion from the all-time high of $51 billion in July. The drop reflected both lower shipments and oil prices.

The big decline in oil lowered total imports to $223.9 billion, the second highest level on record but down by 2.4 percent from the all-time high set in July.

U.S. exports totaled $164.7 billion, also the second highest level on record, but down 2 percent from the July record. Exports have been the standout performer this year keeping economic growth positive.

However, that could be about to change. A growing number of economists believe the renewed turbulence on Wall Street virtually guarantees the U.S. will fall into a recession this year. With the turmoil spreading to other countries, there is a growing worry about a global downturn.

The spreading economic malaise has put a damper on oil prices which surged to record highs in July but since then have fallen dramatically. Oil currently is currently trading around $83 a barrel, far below the record of $147 set in mid-July.

The declines in oil support the view of economists that the trade deficit will show further improvements in coming months, reflecting a lower oil bill and falling demand for other imported goods as the weak U.S. economy depresses demand.

For August, the deficit with China edged up by 1.8 percent to $25.3 billion, the second-highest imbalance on record, as imports from that country rose to an all-time high. The import gain reflected big increases in shipments of toys and games, cell phones and clothing as U.S. retailers stocked up for the holiday sales season.

So far this year, the trade deficit is running at an annual rate of $717.1 billion, up slightly from last year's deficit of $700.3 billion, which had represented the first decline after setting records for five straight years.

Even though the deficit is off its all-time highs, critics say the imbalances are still too high and are putting the country's economic future in jeopardy as the U.S. has to borrow billions of dollars from China and other nations to balance its books, and domestic companies close American factories to move overseas to take advantage of lower wages.

The Bush administration contends its free-trade policies are the only way to move forward in an increasingly global economy. Democrats argue that the administration has not done enough to protect American workers from unfair competition from China and other nations that they contend are not abiding by global trade rules in such areas as worker rights.

For August, the deficit with Canada, America's biggest trading partner, fell by 10 percent to $7.4 billion. The deficit with the European Union dropped 38.5 percent to $6.8 billion.

Comments

[jeffrey678]

FREE TRADE IS MYTH!

[Stirner]

It does get tedious...seems like only yesterday we were ready to go to war with China because it was a Communist society. So, the Chinese gave in and became a Capitalist society. I bet a lot of people look back to the "good old days", when Communists were Communists.

[Routemaster]

"Give me a place to stand and leverage long enough and I will bankrupt the world."
Archimedes did not say this.

[dora rice]

THAT'S ONE WAY OF TAKING CARE OF THE DEFICIT. AMERICANS CAN'T BUY ANYMORE. WE HAVE TWO OF EVERYTHING ANYHOW AND SOMETIMES THREE. NO SKIN OF MY BACK. GET THE DEFICIT DOWN, NO MORE WALL MART SHOPPING. NO MORE SHOPPING UNTIL YOU DROP. HA HA HA YOU LEFTIST REMEMBER ONE THING , ALTHOUGH YOU DON'T HAVE STOCK, YOU STILL LIVE SOMEHOW OF THE STOCKMARKET.......WHAT YOU BUY, WHERE YOU WORK, EVEN YOUR FOODSTAMPS ARE AFFECTED BY IT, OR YOUR MEDICAID. STOCKS ARE DYING AS OBAMA AND HIS SOCIALITS GROW

[motley2]

So, the deficit with China bumped up a little in August due to purchases by retailers stocking up for the holiday season ahead. How many of those orders will get canceled, now that it looks like most Americans won't be in the mood to buy? Or will we drown our pain in cheap consumer goods?

[tyger]

We Americans let ourselves down. We didn't watch the signs and reduce our spending accordingly. We should have demanded Bush end the Iraq conflict. He represents us and we should never allow any politician to publicly ignore the electorate. Had we taken the time to go on an email blitz or conduct a protest on the Whitehouse lawn, perhaps things would not have gotten so dire. Bush and his cabinet are very rich now, I personally believe the supposed unaccounted for billions are in their off shore accounts. We need to lay down our differences and insist on investigations on the missing billions.

[earlofi]

you did it bushie you solved the trade deficit with china congratulations ... and all it took was a great depression

[ajax2]

The Commerce Department said Friday the trade deficit declined by 3.5 percent in August to $59.1 billion.
Bush reduces the trade deficit and the liberal press ignores him.

[Saganslegacy]

That surely is a way to look at it.

Heaven, this this real pain, boy, you are smart.

[PT6]

This is spreading around the WORLD!

Another day another Trillion Dollars!

Hey! Lets talk about a 63 year old professor who wants to help children learn!

McCain Priorities!

[themodernleader]

Trade deficit falls as Americans go from borrowers to beggars.

[Norge]

Americans need to be weened from loan slavery.

Loan slavery is the root of the American people's
financial problem.

They and their government are sinking hourly into the bigest debt sink hole in the history of any nation.

Success does not mean consumeconsumeconsumeconsume.

[davidpeace]

Exactly. This is the result of credit-capitalism gone amok. All that fake wealth out there needs to be destroyed. Unlike 1929, the crash will last a lot longer than a one day slump. So far, that's proving to be correct. Many people have seen this coming and warned the government, as well as We the People. But to give us a little credit, our government by and for the rich doesn't, even now, want to listen the will of the masses. They are thinking, even now, of handing out another Splurge - because $855 Billion wasn't enough, so they need more. Now to take that credit away from We the People, we know that Congress doesn't listen to the "little people". Why, then, do we keep putting the same corrupt criminals back in, time after time? Vote 3rd party!

[Norge]

Dr.Ron Paul talked economic responsibility and to go from a war based economy to a peacetime economy and I completely agree with such.

[Ohg]

Irony abounds - we'll show the chinese, we will go broke and then they cant sell us any more products. Is this the legacy of the GOP, war death hatred and socialism. This world is upside down. .................
http://thefiresidepost.com/2008/10/09/the-gop-legacy-wars-death-hatred-socialism/

[AlbertoG]

Actually the government should set temporary (long term) import quotas to equalize our exports to whatever we import. One dollar exported, one dollar allowed to be imported. That will quickly start curing our trade deficit

[darthdarcy]

Hey that's one good thing our trade deficit will be reduced if Americans can't even afford cheap junk from China...!

Yeepee Yeehaaa..!

[JoeBlough]

Why haven't we turned off the money spigot to Iraq. We spending/wasting $100s of billion and not getting anything in return. Stop the waste!