U.S. Trade Deficit Declines in February

According to data released by the Bureau of Economic Analysis (BEA) of the U.S. Commerce Department, the U.S. international trade deficit decreased to $45.8 billion in Feb. 2011 from $47 billion in January. Although exports fell slightly in Feb., imports fell even more, accounting for the decrease in the trade deficit.

The U.S. has had a trade deficit—the difference between the nation’s exports and imports—since 1975, as Americans have used more foreign goods than they export. While the latest data points to improvement in the imbalance, the decline in exports shows slower U.S. production. The decline in imports also marks lower demand for products and services within the U.S.

February’s exports of goods and services decreased by 1.4 percent to $165.1 billion after climbing 2.6 percent in January to a record-high of $167.5 billion, surpassing the previous record of $165.7 billion in July 2008, according to BEA. Decreased demand for autos and parts, and for capital goods like semiconductors and engines contributed to the drop.

Additionally, imports fell 1.7 percent to $210.9 billion after climbing 5.4 percent in January, the biggest gain since 1993. Decreasing demand for autos and petroleum products led to the decline. However, economists stressed the dip in imports is likely temporary, given that oil prices have risen in recent weeks, it is likely to push the deficit wider in March and April.

Some economists expect this year’s trade deficit will come close to matching last year’s $495.7 billion imbalance. That was 32.8 percent higher than the 2009 trade deficit, when the recession cut America’s demand for foreign goods.

The soaring trade deficit became a political issue in last fall’s congressional elections. Opponents of the administration’s trade policies contend President Barack Obama has not done enough to protect U.S. workers from unfair foreign competition. Many have focused solely on China’s refusal to allow its currency to rise more quickly in value against the dollar. A stronger yuan compared to the dollar would make U.S. goods more competitive in China and also mean Chinese goods would be more expensive in the U.S.

In February, the trade gap narrowed between China and the U.S.—but it remains the world’s largest trade imbalance between two countries. China exported $18.8 billion more in goods and services to the U.S. than it imported from us during that month. The trade gap stood at $23.3 billion in January.