Chinese imports, oil drive trade deficit up

A sharp rise in the bill for foreign oil offset record sales of U.S. products abroad.

WASHINGTON - The U.S. trade deficit rose to its second-highest level of the year as the price of imported crude oil jumped and demand for Chinese goods remained strong despite recalls of tainted products.

The Commerce Department reported yesterday that the deficit for May rose to $60.04 billion, 2.3 percent more than in April. Most of the deterioration in the trade balance reflected a big increase in the bill for foreign oil, which swamped record sales of U.S. products abroad.

The Bush administration said the continued rise in exports validated President Bush's campaign for free-trade deals and his opposition to raising import barriers.

"Our strategy is to focus on growing our exports as opposed to introducing protectionist policies to limit our imports," Commerce Secretary Carlos Gutierrez said in an interview with the Associated Press.

This year, the overall deficit is running at an annual rate of $709 billion. That is down 6.5 percent from last year's $758.5 billion, the fifth consecutive year that the deficit had set a record.

Analysts are looking for the deficit to improve this year. U.S. exports are benefiting from strong growth abroad. Also, the falling value of the dollar against the euro and other currencies lifts exports by making U.S. goods cheaper for foreign buyers.

For May, exports of goods and services rose 2.2 percent to an all-time high of $132 billion. That figure reflected big gains in sales of U.S.-made aircraft, electronic products, and oil-drilling equipment.

Imports also set a record, rising 2.2 percent to $192.1 billion. That included a 6.2 percent jump in petroleum products to $26.6 billion, the highest since last August.

The deficit with China in May rose to $20.02 billion, the biggest imbalance since January. While the overall deficit so far this year is smaller than last year, the deficit with China is 17.2 percent ahead of the 2006 pace, putting China on track to surpass last year's record of $233 billion.

Critics have seized on a string of recalls this year, including pet food tainted with an ingredient imported from China and Chinese-made toys, tires and toothpaste, as evidence that consumers' safety is being jeopardized.

The trade flows in May, which took place before most of the recalls were announced, showed strong demand for Chinese products. Imports rose 4.6 percent to $25.3 billion.

Leading the increase were clothing and textiles, but shipments of fish and shellfish also rose. In June, the Food and Drug Administration banned the import of five types of seafood from China after the agency found unacceptable levels of certain types of drugs.