America’s trade deficit hits all-time high
Imports continue to soar as U.S. manufacturing contracts
WASHINGTON - The U.S. trade deficit soared to an all-time high of $725.8 billion in 2005, pushed upward by record imports of oil, food, cars and other consumer goods. The deficit with China hit an all-time high as did America’s deficits with Japan, Europe, OPEC, Canada, Mexico and South and Central America.
The Commerce Department reported Friday that the gap between what America sells abroad and what it imports rose to $725.8 billion last year, up by 17.5 percent from the previous record of $617.6 billion set in 2004.
It marked the fourth consecutive year that America’s trade deficit has set a record and was certain to spark increased debate in Congress over President Bush’s trade policies. Since mid-2000 the country has lost nearly 3 million manufacturing jobs and Democrats blame the administration’s policy of emphasizing free trade agreements.
Last year’s deficit reflected the fact that imports rose by 12.9 percent last year to an all-time high of $2 trillion, swamping a 5.7 percent increase in exports, which were up 5.7 percent to a record high of $1.27 trillion.
Now, it is not just China - we cannot say the problem is that we are being killed by cheap labor alone because:
America’s trade deficit set records with much of the rest of the world as well. Among those records was a $122.4 billion gap with the 25-nation European Union, a $92.7 billion deficit with the nations that belong to the Organization of Petroleum Exporting Countries, a $76.5 billion deficit with Canada and a $50.1 billion deficit with Mexico. Canada and Mexico are America’s partners in the North American Free Trade Agreement. The deficit with the countries of South and Central America rose to a record $50.7 billion last year.
We are being beaten by the EU as well. They have some of the hightest labor costs and huge social program costs. It is time to stop blaming these.
Only a sound trade policy and increased investment in education will turn this around. Or else:
The rising trade deficits must be financed by increased borrowing from foreigners, who so far have been happy to sell us their products and hold U.S. dollars in payment which they invest in U.S. stock, bonds and other assets. The concern is that at some point foreigners will want to reduce their dollar holdings. If the change occurs at a rapid pace it could send the value of the dollar, U.S. stocks and bond prices all plunging.
We are mortgaing tomorrow.