Growing US trade deficit partly attributed to Chinese imports

The US trade deficit jumped to an all time high in August due to elevated oil prices and cheap imports from China. The new data is predicted to bring the growth of the US economy down to about 2 percent in the third quarter, but strong import demand is an indication that the foundations of the economy remain strong.

Contrary to the Wall Street prediction that the deficit would fall, the figure for August rose to $69.9 billion (€57 bn), signaling an increase of $1.9 billion (€1.55bn) to the data from July.

A strong demand for cheap goods from China caused the bilateral deficit to rise 2.3 percent to $122.4bn (€99.8bn).

Exports from the US rose 2.3 percent to $122.4bn (€99.8bn) while imports rose 2.4 percent to $192.3bn (€156.8 bn).

Auggie Tantillo, executive director of the American Manufacturing Trade Action Coalition, said that the US government should take firm action to reduce the gaping trade deficit with China. Tantillo went on to underline that China's cheap currency and unfair trade practices are the main culprit for the situation.

Economist Stephen Gallagher from Société Générale said that imports from other parts of Asia also go through reprocessing in China, so China is not the only country to contribute to the problem.

China's foreign trade report for September showed a dip in its surplus from $18.8bn (€15.3bn) in August to $15.3bn (€12.5bn). Figures for net Chinese exports are set for a record year in 2006.

In the US, the average prices of imported oil reached a record high of $66.12 (€50.65) a barrel.

The US trade deficit for the first eight moths of 2006 stands at $522.8bn (€425.64bn). In 2005, the corresponding figure was $457bn (€372.64bn). The current trend has analysts predicting that the annual deficit for this year will exceed last year's $717bn (€584.64bn).