Trade Deficit Surges

U.S. Trade Imbalance Increases 6 Percent As Oil Imports Hit Record High

(CBS/AP)  America's deficit with China hit a record at $17.6 billion in June, surpassing the old mark of $16.8 billion set last October. Last year, the deficit with China hit $162 billion, the highest imbalance ever recorded with any country, but this year's imbalance is running 32 percent above the 2004 pace.

Much of the deterioration reflects a flood of clothing and textile shipments from China since Jan. 1, when global quotas expired. Responding to pleas of American textile manufacturers about job losses and plant closings, the administration has moved to re-impose quotas in several clothing categories.

The administration also announced on Thursday that it would begin negotiations next week aimed at reaching agreement with China on a comprehensive cap on Chinese clothing and textile imports.

Responding to rising protectionist pressures in Congress, the administration has also increased pressure on China to revalue its currency. The Chinese last month did announce a small 2.1 percent revaluation of the yuan but American manufacturers argue that the Chinese currency is undervalued by as much as 40 percent, giving China a huge competitive advantage over American products.

With the record trade deficits and the continued loss of jobs in manufacturing — declines that total 3 million since mid-2000 — the administration has found it harder to sell new free trade agreements in Congress.

Last month, Bush won passage of the Central American Free Trade Agreement by a slim two-vote majority in the House after a hard fought campaign in which critics contended that the trade deals were opening American workers to unfair competition from low wage countries.

The new trade report showed that America's deficit with Mexico hit a record high of $4.8 billion. Mexico and Canada are partners with the United States in the North American Free Trade Area.

The deficit with Canada rose 13.7 percent to $5.4 billion in June while the deficit with the 25-nation European Union rose by 2.7 percent to $10.8 billion in June.