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Last Updated: Wednesday, 12 April 2006, 14:59 GMT 15:59 UK
US trade deficit with China falls
Shoppers in a discount Chinese store
Some US politicians blame China for its trade woes
The US trade deficit fell back in February as its politically sensitive trade gap with China shrank to the lowest level in nearly a year.

The Commerce Department said the trade deficit - the difference between what the US exports and imports - had narrowed by 4.1% to $65.7bn (37.6bn).

The deficit with China shrank to $13.8bn, the lowest since March 2005.

The trade gap with China has fuelled calls by some in the US for a tougher stance on Beijing's trade practices.

President George W. Bush will raise the issue of Beijing's currency policy when he meets China's leader next week.

American manufacturers say that the Chinese yuan is undervalued by as much as 40% against the dollar, making the country's exports artificially cheap.

'Positive news'

Analysts had expected weaker consumer demand and lower oil prices in February to cut the trade deficit by $1bn from January's record high of $68.6bn, but it ended up falling by almost $3bn.

February's smaller trade gap reflected a 2.3% percent drop in imports and a 1.2% percent fall in exports.

It was still the third highest ever recorded, and the cumulative deficit for the first two months of 2006 is running 13.5% above the pace seen at this stage last year, when the 12-month deficit hit an all-time record of $723.6bn.

"The narrower trade deficit is a positive piece of news for February," said Patrick Fearon, senior economist with stockbrokers A.G.Edwards and Sons in St.Louis, Missouri.

"However, with energy prices going up recently, you have to remember that there's a good chance that the trade deficit will widen again over the next few months."

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