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U.S. Trade Deficit Shrinks, But Dollar Could Remain High

By John S. McClenahen With the West Coast dock dispute apparently reducing the flow of imports, the U.S. trade deficit for goods and services fell to $35.066 billion in October, its second consecutive monthly decline, reports the U.S. Commerce Department. Economists generally expected a slightly larger $36.6 billion deficit. October's deficit was $2.033 billion less than the revised $37.099 billion deficit recorded in September and $3.028 billion less than the $38.094 billion deficit posted in August, the highest so far in 2002. U.S. exports in October were down $842 million from September and imports were $2.875 billion less. U.S. exports totaled $81.983 billion in October while imports were $117.049 billion. "The West Coast dock shutdown likely depressed the deficit, but to what extent is uncertain," says Maury Harris, chief U.S. economist at UBS Warburg LLC, New York, a unit of UBS AG. "All that can be said is that the [U.S.] trade gap remained massive." Harris notes that the size of the trade deficit puts the U.S. in need of large capital inflows and, he contends, "leaves the Bush Administration little choice but to continue its 'strong dollar' policy."

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