Business your connection to The Boston Globe

US trade deficit up as price of oil rises

Demand for Chinese products stays strong

WASHINGTON -- America's trade deficit rose to its second-highest level of the year as the price of imported crude oil jumped and demand for Chinese products remained strong despite recalls of tainted products.

The Commerce Department reported yesterday that the deficit for May rose to $60.04 billion, 2.3 percent more than in April. Most of the deterioration in the trade balance reflected a big increase in the foreign oil bill, which swamped record sales of US products abroad.

The Bush administration said the continued rise in exports validated President Bush's campaign for free trade deals and his opposition to raising import barrier.

The administration is working to get Congress to approve free trade deals with South Korea, Peru, Colombia, and Panama. The president also wants lawmakers to extend his power to seal trade agreements without congressional intervention. Such authority expired at the end of July. That effort faces much resistance because of unhappiness over the trade deficits and the loss of 3 million US manufacturing jobs since 2000.

So far this year, the overall trade deficit is running at an annual rate of $709 billion. That is down 6.5 percent from last year's $758.5 billion.

Analysts are looking for the deficit to improve this year. US exports are benefiting from strong growth abroad. Also, the falling value of the dollar against the euro and other currencies lifts exports.

For May, exports of goods and services rose 2.2 percent to an all-time high of $132 billion. That figure reflected big gains in sales of aircraft, electronic products, and oil drilling equipment.

Imports also set a record, rising 2.2 percent to $192.1 billion. That included a 6.2 percent jump in petroleum products to $26.6 billion, the highest since last August.

Critics said the latest jump in the deficit supports their contention the administration is pursuing a flawed trade policy.