MercoPress. South Atlantic News Agency

US trade deficit in February contracts 4.1%

United States trade deficit contracted 4.1% in February with a strong drop in imports and a significant 22.7% reduction in the deficit with China.

The US Commerce Department said the trade deficit - the difference between exports and imports - had narrowed by 4.1% to 65.7billion US dollars from 68.5 billion US dollars in January.

Similarly the deficit with China shrank to 13.8 billion US dollars, the lowest since March 2005. The trade gap with China has repeatedly fuelled calls in the US Congress 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 Hu Hintao 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.

However 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 723.6 billion US dollars.

However, with energy prices going up, the oil barrel average climbed 2 dollars in February reaching 53.72 recently, there's a good chance that the trade deficit will widen again over the next few months.

This week China revealed that its overall March trade surplus almost doubled to 11.2 billion US dollars from 2.45 billion in February and 5.7 billion a year ago.

According to the latest figures, exports in March rose 28.3% to 78.05 billion US dollar from a year earlier, while imports advanced by 21.1% to 66.86 billion.

Analysts said that the size of the surplus was a shock as the first three months of a year are usually the weakest, and that there was a good chance it could now top the 100 billion mark in 2006.