US trade gap hits record in 2004

The gap between US exports and imports hit an all-time high of $671.7bn (£484bn) in 2004, latest figures show.

The Commerce Department said the trade deficit for all of last year was 24.4% above the previous record - 2003's imbalance of $496.5bn. The deficit with China, up 30.5% at $162bn, was the largest ever recorded with a single country. However, on a monthly basis the US trade gap narrowed by 4.9% in December to £56.4bn. The US consumer's appetite for all things from oil to imported cars, and even wine and cheese, reached record levels last year and the figures are likely to spark fresh criticism of President Bush's economic policies.

Democrats claim the administration has not done enough to clamp down on unfair foreign trade practices. For example, they believe China's currency policy - which US manufacturers claim has undervalued the yuan by as much as 40% - has given China's rapidly expanding economy an unfair advantage against US competitors.

Meanwhile, the Bush administration argues that the US deficit reflects the fact the America is growing at faster rate than the rest of the world, spurring on more demand for imported goods. Some economists say this may allow an upward revision of US economic growth in the fourth quarter. But others point out that the deficit has reached such astronomical proportions that foreigners many choose not to hold as many dollar-denominated assets, which may in turn harm growth. For all of 2004, US exports rose 12.3% to $1.15 trillion, but imports rose even faster by 16.3% to a new record of $1.76 trillion. Foreign oil exports surged by 35.7% to a record $180.7bn, reflecting the rally in global oil prices and increasing domestic demand. Imports were not affected by the dollar's weakness last year. "We expect the deficit to continue to widen in 2005 even if the dollar gets back to its downward trend," said economist Marie-Pierre Ripert at IXIS.