The Economy

U.S. Trade Deficit Drops, Unexpectedly

May 11, 2005

Economists generally expected the U.S. international trade deficit for goods and services to increase at least few hundred million dollars in March from February's record level. Instead, as surprising as an unanticipated rebate, the March deficit fell to $54.986 billion from February's revised figure of $60.570 billion, the U.S. Commerce Department reported on May 11.

In March U.S. exports reached an all-time monthly high of $102.205 billion and imports slowed to $157.191 billion from $161.250 billion in February.

"The sources of surprise in March were on both the export and import sides of the trade ledger, notes Sheryl King, a senior economist at Merrill Lynch & Co., New York. "Exports rose 1.5%, with a 26.9% surge in civilian aircraft exports leading the way. Telecom and food and beverages exports also saw notable increases of 8.5% and 6.6%, respectively," she relates. "On the import side, activity declined by 2.5%, driven by sharp drops in pharmaceuticals and apparel."

Peter Morici, a professor at the University of Maryland's Smith School of Business, points out that real petroleum imports declined in March. "Prices are starting to bite on imports, mostly in refined products," he says. Meanwhile, rising energy and health care costs may be reducing the amount U.S. consumers have to spend, which means lower retail sales and less demand for imports, he suggests. And third, the U.S. trade deficit with China is shrinking slightly. "Either Wal-Mart and others are diversifying to other points in Asia, or Chinese officials are starting to take administrative action of some kind to avoid a real revaluation" of the yuan, the Chinese currency, Morici says.

The U.S. trade deficit with China was $12.904 billion in March, lower than February's $13.871 billion, but still the largest deficit with any single country. For the first three months of 2005, the U.S. had a $42.030 billion trade deficit with China, a figure that if repeated the rest of the year would being the U.S. trade deficit with China to nearly $170 billion for all of 2005.

About the Author

John McClenahen | Former Senior Editor, IndustryWeek

John S. McClenahen, is an occasional essayist on the Web site of IndustryWeek, the executive management publication from which he retired in 2006. He began his journalism career as a broadcast journalist at Westinghouse Broadcasting’s KYW in Cleveland, Ohio. In May 1967, he joined Penton Media Inc. in Cleveland and in September 1967 was transferred to Washington, DC, the base from which for nearly 40 years he wrote primarily about national and international economics and politics, and corporate social responsibility.

      McClenahen, a native of Ohio now residing in Maryland, is an award-winning writer and photographer. He is the author of three books of poetry, most recently An Unexpected Poet (2013), and several books of photographs, including Black, White, and Shades of Grey (2014). He also is the author of a children’s book, Henry at His Beach (2014).

      His photograph “Provincetown: Fog Rising 2004” was selected for the Smithsonian Institution’s 2011 juried exhibition Artists at Work and displayed in the S. Dillon Ripley Center at the Smithsonian Institution in Washington, D.C., from June until October 2011. Five of his photographs are in the collection of St. Lawrence University and displayed on campus in Canton, New York.

      John McClenahen’s essay “Incorporating America: Whitman in Context” was designated one of the five best works published in The Journal of Graduate Liberal Studies during the twelve-year editorship of R. Barry Leavis of Rollins College. John McClenahen’s several journalism prizes include the coveted Jesse H. Neal Award. He also is the author of the commemorative poem “Upon 50 Years,” celebrating the fiftieth anniversary of the founding of Wolfson College Cambridge, and appearing in “The Wolfson Review.”

      John McClenahen received a B.A. (English with a minor in government) from St. Lawrence University, an M.A., (English) from Western Reserve University, and a Master of Arts in Liberal Studies from Georgetown University, where he also pursued doctoral studies. At St. Lawrence University, he was elected to academic honor societies in English and government and to Omicron Delta Kappa, the University’s highest undergraduate honor. John McClenahen was a participant in the 32nd Annual Wharton Seminars for Journalists at the Wharton School at the University of Pennsylvania in Philadelphia. During the Easter Term of the 1986 academic year, John McClenahen was the first American to hold a prestigious Press Fellowship at Wolfson College, Cambridge, in the United Kingdom.

      John McClenahen has served on the Editorial Board of Confluence: The Journal of Graduate Liberal Studies and was co-founder and first editor of Liberal Studies at Georgetown. He has been a volunteer researcher on the William Steinway Diary Project at the Smithsonian Institution, Washington, D.C., and has been an assistant professorial lecturer at The George Washington University in Washington, D.C.