The U.S. trade deficit with the rest of the world surged by nearly 5 percent to $42.3 billion in May, reflecting strong growth in imports of cars, computers and clothing, the Commerce Department reported Tuesday morning.
The monthly deficit is at its highest since November 2008. Since bottoming out about a year ago, U.S. exports have put in a strong performance, growing by 21 percent, as U.S.-made shipments of heavy equipment like tractors and airplanes were scooped up by fast-growing developing nations like China and Brazil.
But the solid gains in exports, which helped to revive growth in the overall economy, were not enough to offset a 29 percent surge in imports in the last year.
“Imports are rising much faster than exports, and the overall trade deficit will increase even more sharply when oil prices rebound, threatening the economic recovery,” said Peter Morici, business professor at the University of Maryland.
“President Obama has cautioned Americans about the dangers of another boom financed by excessive borrowing. But unless the administration implements policies that reverse the huge trade deficits on oil and with China, the nation risks economic stagnation,” he said.
Mr. Obama last year extracted pledges from other global political leaders in the Group of 20 economic powers to seek more balanced growth between nations. But the U.S. economy a year ago resumed its pattern of consuming more goods from the rest of the world than the U.S. is able to produce or to export.
Mr. Morici and other analysts blame that trade imbalance — particularly the gigantic $300 billion yearly trade deficit with China — for helping to cause the credit and housing bubble that led to the 2008 financial crisis and Great Recession. China used its massive earnings from exports to the U.S. to buy U.S. bonds and mortgages, helping to dramatically lower interest rates and feed the bubbles that dragged down the whole world economy when the bubbles collapsed in 2008.
Noting that oil and consumer goods from China account for nearly the entire trade deficit, Mr. Morici said the nation needs a “seismic change in energy and trade policies” to reverse the trend.
But the administration’s moratorium on offshore oil drilling will only worsen the deficit, he said, and its diplomatic efforts succeeded in extracting only a mild concession from China last month when it agreed to allow a minor appreciation of its currency, the yuan, against the dollar.
However, other economists see the growing string of trade deficits simply as a sign that the U.S. economy is experiencing relatively strong growth and is helping to pull along the rest of the world.
The 7 percent surge in consumer goods imports, excluding autos, in May showed “the health of consumer demand” and was an “upbeat story,” said Andrew B. Busch, strategist at BMO Capital Markets. It also reflected the rise of the dollar this year against other major currencies, which makes overseas goods cheaper for Americans.
Still, Harm Bandholz, economist at Unicredit Markets, said he was surprised at the strong growth in consumer imports, which came despite a decline in oil imports. He said that will weigh on U.S. economic growth in the second quarter, possibly dragging down the growth rate to below 3 percent.
• Patrice Hill can be reached at phill@washingtontimes.com.
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