According to figures from the Commerce Department yesterday, the annual deficit in 2004 was up 24 per cent on 2003, itself a record. December's shortfall was exceeded only by November 2004, when the deficit reached an unprecedented $59bn.
Though US exports last year hit a record $1.15 trillion, they were eclipsed by imports of $1.76 trillion. The US deficit with China alone soared to $162bn, while 2004 also saw record bilateral deficits with Canada, Mexico and the European Union. Imports of foreign oil surged by 36 per cent to a record $181bn, reflecting the rally in global oil prices and increasing domestic demand.
The news reversed the recent rise in the dollar, spurred by a prediction from Alan Greenspan, the Federal Reserve chairman, that the trade deficit would soon start to decline.
Despite the weaker dollar, which makes US exports more attractive to foreign buyers, many analysts fear the trade deficit could actually worsen slightly in 2005, as dollar-denominated imports become more expensive. "We expect the deficit to continue to widen in 2005," Marie-Pierre Ripert, an economist at IXIS, said.
The deficit on current account, the broadest measure of US trade in foods and services, is running at an even higher rate, of $650bn annually, or some 6 per cent of gross domestic product. To finance its external deficit, the US must attract capital inflows of almost $2bn a day, nearly $60bn a month.Reuse content