The Bush administration's policy of economic non-intervention brought the world financial system one step nearer meltdown with Tuesday's announcement by the Commerce Department that the US trade gap widened in February to an alltime record of $61 billion (€47.39bn; £32.37bn).
America's imbalance between exports ($100.5bn) and imports $161.5bn) grew by 4.3% from the January total of $58.5bn, due to two primary factors: the surging cost of oil and imports from the People's Republic of China.
Warning bells clanged in a client note issued by investment bank Bear Sterns. This reduced an earlier annualized expansion forecast of 4.44% for Q1 to 4.0% - a fall of nine points.
Similar concern was expressed by Greenwich Capital Markets, which cut its Q1 forecast by a slightly larger margin - from 4.5% to 4.0%, warning: "We are now poised to post back-to-back massive increases in the trade deficit in the fourth quarter of last year and the first quarter of this year. As a result, yet another quarter of strong domestic demand will probably be held down."
Politicos too are alarmed. Opines Senator Byron Dorgan (Democrat, North Dakota): "Uncle Sam has been played for Uncle Sucker by incompetent trade negotiators, a failure to enforce trade agreements and by our trading partners who see the US as a patsy."
Even allowing for partisan point-scoring, the senator's words will have many nonaligned heads nodding in agreement. In 2004, China's trading surplus with the USA hit $162 billion.
Data sourced from USA Today Online; additional content by WARC staff
