WASHINGTON (AP) — The U.S. trade deficit narrowed slightly in August because imports fell a little more than exports. The trade gap with China hit a record high for a single month.
The Commerce Department said Thursday that the deficit dipped to $45.61 billion in August, the lowest gap in four months. The July deficit was revised upward to $45.63 billion.
For the year, the deficit is running at an annual rate of $564.3 billion, 13 percent higher than last year. A higher deficit acts as a drag on economic growth because it means fewer jobs for American workers.
In August, U.S. companies sold fewer cars, aircraft engines and oilfield equipment overseas. Exports slipped by $95 million to $177.6 billion.
At the same time, the U.S. imported fewer cars, clothes, televisions and furniture. Imports fell by $111 million to $223.2 billion.
Congress on Wednesday approved free trade agreements with South Korea, Colombia and Panama. That ended a four-year impasse in approving new free trade deals.
The administration says the three deals will boost U.S. exports by $13 billion a year.
The agreement with South Korea will support 70,000 American jobs, the administration says, and could increase exports by $10 billion. That's enough to eliminate the current $10 billion trade deficit the United States has with that country. The trade pact will make 95 percent of American consumer and industrial goods sold in South Korea duty free within five years.
However, labor unions and others who opposed the trade deals said they will subject American workers to increased foreign competition and end up costing American jobs. America's rising trade deficits have fueled growing voter unhappiness at a time that unemployment is stuck at painfully high levels.
A lot of the political anger is focused on China, the country that is running the largest trade surplus with the United States. Through July, the U.S. trade deficit with China was running 10 percent above the pace during the same period in 2010, a year in which the imbalance between the two nations hit an all-time high.
America's trade deficit with China jumped to $29 billion in August, the highest level ever for a single month. Through the first eight months of this year, the deficit is running 9 percent higher than the same period in 2010, a year when the United States had a record imbalance with China.
On Tuesday, the Senate approved legislation that would allow the administration to impose penalty tariffs on Chinese products sold in the United States if China does not do more to allow its currency to rise in value against the dollar.
Critics charge that China is keeping its currency artificially low against the dollar to make Chinese goods cheaper in the United States and American products more expensive in China.
The bill passed the Senate on a lopsided 63-35 vote. But its fate is uncertain in the House. Republican leaders there have warned that it risks sparking a trade war with China.