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Last Updated: Wednesday, 10 March, 2004, 17:33 GMT
Record high for US trade deficit
Ship unloading containers
There were hopes that the dollar's weakness would boost exports
The US trade deficit hit an all-time high of $43.1bn (24bn) in January, dashing hopes that the recent fall in the dollar would stimulate exports.

Meat and poultry exports were hit by outbreaks of mad cow disease and bird flu, contributing to a 1.2% slide in overall exports to $89bn.

Imports stayed close to historic highs after a rise in imported oil prices.

The politically sensitive trade deficit with China increased to $11.5bn, up from $9.9bn in December.

"To me this is very worrisome. The trade deficit is not improving. It is getting worse despite the dollar depreciation," said Wells Fargo Banks chief economist Sung Won Sohn.

Temporary factors

In recent months the dollar has fallen sharply against major currencies which, in theory, should benefit the US trade balance in two ways.

Firstly, it should make US exports cheaper and thus more competitive in overseas markets. Secondly, it should make imports more expensive, reducing demand for imported goods.

However, analysts noted there were some one-off factors behind the worse-then-expected figures.

Imported oil prices during January were at their highest level since March 2003, which led to a 10% rise in the US's petroleum deficit.

Also, exports were hit by restrictions on meat exports following outbreaks of mad cow disease and bird flu.

China

The trade deficit with China rose after imports from the country grew by 6.6%.

The US government has been placing pressure on China to revalue its currency against the dollar.

The yuan is currently pegged at 8.28 yuan to the dollar, but US manufacturers have complained the currency is undervalued by as much as 40% giving Chinese exporters an unfair advantage.


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