MercoPress. South Atlantic News Agency

Record US trade deficit and falling dollar

The United States trade deficit in 2003 reached a staggering 489 billion US dollars, --a quarter of it with China--, and 17,1% above the previous 2002 record.

The monthly deficit reached 42,5 billion US dollars last December, well above the forecasted 40 billion. Imports jumped to 132,8 billion and exports dropped mildly to 90,4 billion US dollars pushed by the strong rebound of the US economy.

The deficit with China rocketed to 124 billion from 103 billion US dollars in 2002. The gap with the European Union surged to 10,3 billion from 7,35 billion and with the Eurozone expanded to 8,2 from 6 billion US dollars.

Latinamerica trade surplus with the US also increased from 55 billion US dollars in 2002 to 67,4 billion last year. Most of the US deficit was with Mexico 40,6 billion, up from 37,1 billion in 2002.

The latest figures sent the Euro to a new record high last week against the US dollar touching 1,2898 US dollars, and against the British pound, 1,8989 US dollars.

However in testimony before Congress last week, Federal Reserve chairman Alan Greenspan said he was not concerned about the impact of a weak US dollar in US inflation, saying it would eventually help contain the huge trade surplus as imports become dearer.

Contrary to previous market speculation Mr. Greenspan also indicated that the Fed "could be patient" regarding a possible future increase in interest rates.

The US economy in the last quarter grew at an annual rate of 4%, although employment recovery was not as vigorous.

Following Mr. Greenspan's statement and since 2004 is an election year, market analysts believe the US dollar will further weaken giving exports time to contribute to a solid economic growth and simultaneously help reduce the current account deficit.