Ahead of the Bell: US Trade Gap

US trade gap expected to narrow slightly in February

Associated Press
US trade deficit hits $42.3 billion in February
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FILE - In this Wednesday, Oct. 23, 2013, file photo, container ships wait to be off loaded in a thick fog in Oakland, Calif. The Commerce Department reports on the U.S. trade deficit for February Thursday April 3, 2014 at 8:30 a.m. EDT. (AP Photo/Ben Margot, File)

WASHINGTON (AP) -- The Commerce Department reports on the U.S. trade deficit for February. The report is scheduled to be released at 8:30 a.m. EDT Thursday.

SLIGHTLY LOWER: The forecast is that the deficit will drop slightly to $39 billion in February, down 0.3 percent from January's $39.1 billion deficit.

ENERGY SWING: In January, the gap widened slightly as a rise in imports of oil and other foreign goods offset a solid increase in exports.

The trade deficit is the difference between imports and exports. A higher trade deficit acts as a drag on economic growth because it means U.S. companies are making less overseas than their foreign competitors are earning in U.S. sales.

Many economists expect the trade deficit will keep narrowing this year as exports, helped by an energy production boom in the United States, grow faster than imports. But analysts believe the improvement will be modest because they are also looking for imports to rise as a stronger U.S. economy and higher consumer spending attract more foreign goods.

In 2013, the trade deficit dropped 11.2 percent to $474.9 billion.

America's increased energy production is expected to continue. A domestic energy boom has boosted exports and reduced America's dependence on foreign oil. U.S. petroleum exports rose to an all-time high of $137.2 billion last year, up 11 percent from 2012.

Energy imports fell 10.9 percent to $369.4 billion as domestic production took the place of some imports.

The United States set another annual record trade deficit with China last year. That has led to increased pressure on the Obama administration and Congress to take a tougher line on what critics see as unfair trade practices by China to gain trade advantages.

Critics have aimed many of their complaints at China's currency policies. They say Beijing is manipulating its currency to keep it undervalued against the U.S. dollar. That makes Chinese goods cheaper in the United States and more attractive to American consumers and American product more expensive in China.

The Obama administration is lobbying Congress to pass the "fast track" authority it will need to speed approval of two big trade agreements it is currently negotiating, but election-year politics are complicating the White House effort.

The administration is negotiating one trade agreement with Japan and 10 other Pacific nations. The other agreement would be a trans-Atlantic deal with the 28-nation European Union.

The deals would lower trade barriers and are seen by supporters as a good way to boost U.S. export sales. But critics, including many labor unions, contend that the agreements will open American workers to greater competition and actually end up costing U.S. jobs.

While Obama enjoys the support of many U.S. corporate executives and Republicans in Congress for the trade deals, many Democratic lawmakers have voiced their opposition.

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