'The Marketplace Report': U.S. Deficit Shrinks The U.S. trade deficit closed to $55 billion in March -- the largest monthly drop in the trade deficit in more than three years. Marketplace's Bob Moon discusses the unexpected narrowing of the gap.

'The Marketplace Report': U.S. Deficit Shrinks

'The Marketplace Report': U.S. Deficit Shrinks

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The U.S. trade deficit closed to $55 billion in March — the largest monthly drop in the trade deficit in more than three years. Marketplace's Bob Moon discusses the unexpected narrowing of the gap.


Back now with DAY TO DAY. I'm Alex Chadwick.

A pleasant surprise in business news today. The government reports the US trade gap fell by more than 9 percent in March. That's the sharpest decline in three years. We're joined now by Bob Moon, New York bureau chief for MARKETPLACE.

Bob, didn't we get word just a month ago that imports hit a record high in February? This is quite a dramatic shift, isn't it?

BOB MOON ("Marketplace"): It is, indeed, and the question then becomes: Is this temporary or something more? That very quickly became the subject for debate among the experts who watch the trade deficit, and it does come on the heels of a record high for US imports just a month before. Now we have US exports climbing to an all-time high, and there are some skeptical economists who see this as temporary. The say the demand for goods here at home remains more robust than economic growth around the world. And they also point out that the overall trade deficit is so huge that it will be extremely difficult to close the gap on a consistent basis.

CHADWICK: But it looks as though the gap is shrinking or at least it is for a month. That's got to be somewhat encouraging, wouldn't you think?

MOON: Well, there's a little good news and a little bad news in these numbers. What should we do first, the good news or the bad news? The good news is while just a month before the deficit was a record $60 billion, the gap between what the US imports and what it sells to foreign countries narrowed to around 55 billion in March. Now that reflects a 1 1/2 percent increase in US exports, and that covered a wide range of goods from commercial aircraft and telecommunications equipment to farm products and even works of art. The bad news--even with this big improvement in March, the deficit throughout just the first three months of this year is still running at an annual rate of 696 billion, and that is 12 percent-plus higher than the 617 billion record that was set for all of 2004.

CHADWICK: A lot of people on Capitol Hill blame China for this. I wonder if these new numbers are going to make them feel a little bit better about China.

MOON: It's not likely. The deficit with China did decline by 7 percent to about $7.83 billion. That narrowing gap reflects in part a 21 percent drop in imports of clothing and textiles in March, but overall, the imbalance does continue. Imports of these Chinese products are still running at 54 percent higher in the first three months of this year when compared to the same period a year ago, and that reflects a surge that occurred after global import quotas were lifted back on January 1st. So this problem isn't likely to go away anytime soon.

And today in the "Marketplace" newsroom, we're looking at some of the unexpected criticisms of a proposed free-trade agreement with Central America.

CHADWICK: Thank you, Bob.

Bob Moon of public radio's daily business show "Marketplace" from American Public Media.

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