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US trade deficit widens to $42.3 billion in February, highest in 5 months, as exports fall

WASHINGTON - The U.S. trade deficit climbed to the highest level in five months in February as demand for American exports fell while imports increased slightly.

The deficit increased to $42.3 billion, which was 7.7 per cent above the January imbalance of $39.3 billion, the Commerce Department reported Thursday.

U.S. exports slipped 1.1 per cent to $190.4 billion as sales of commercial aircraft, computers and farm goods fell. Imports edged up 0.4 per cent to $232.7 billion, reflecting gains in imports of autos and clothing which offset a drop in crude oil that fell to the lowest level in more than three years.

A higher trade deficit acts as a drag on economic growth because it means U.S. companies are making less overseas than their foreign competitors are earning in U.S. sales.

The trade deficit is the difference between imports and exports. A higher trade deficit acts as a drag on economic growth because it means U.S. companies are making less overseas than their foreign competitors are earning in U.S. sales.

For the first two months of this year, the deficit is running 4.5 per cent below the same period in 2013 when the deficit dropped to $474.9 billion, 11.2 per cent below the annual deficit in 2012.

Many economists expect the trade deficit will keep narrowing this year as exports, helped by an energy production boom in the United States, grow faster than imports. But analysts expect the improvement will be modest because they are also looking for imports to rise as a stronger U.S. economy and higher consumer spending attract more foreign goods.

A domestic energy boom has boosted exports and reduced America's dependence on foreign oil. U.S. petroleum exports rose to an all-time high of $137.2 billion last year, up 11 per cent from 2012. Energy imports fell 10.9 per cent to $369.4 billion as domestic production took the place of some imports.

For February, energy exports dropped 10.2 per cent to $11.1 billion while petroleum imports fell 2 per cent to $31 billion. Crude oil imports fell to $19.5 billion, the lowest level since October 2010.

The deficit with China dropped a sharp 25.1 per cent in February to $20.9 billion. But analysts are still looking for the trade gap with China, which has been the highest with any country, to top the record set in 2013.

Those record deficits have increased pressure on the Obama administration and Congress to take a tougher line on what critics see as unfair trade practices by China to gain trade advantages.

Critics have aimed many of their complaints at China's currency policies. They say Beijing is manipulating its currency to keep it undervalued against the U.S. dollar. That makes Chinese goods cheaper in the United States and more attractive to American consumers and American product more expensive in China.

The Obama administration is lobbying Congress to pass the "fast track" authority it will need to speed approval of two big trade agreements it is currently negotiating, but election-year politics are complicating the White House effort.

The administration is negotiating one trade agreement with Japan and 10 other Pacific nations. The other agreement would be a trans-Atlantic deal with the 28-nation European Union.

The deals would lower trade barriers and are seen by supporters as a good way to boost U.S. export sales. But critics, including many labour unions, contend that the agreements will open American workers to greater competition and actually end up costing U.S. jobs.

While Obama enjoys the support of many U.S. corporate executives and Republicans in Congress for the trade deals, many Democratic lawmakers have voiced their opposition.

The Canadian Press

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