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The U.S. trade deficit likely shrunk in April after growing at the fastest pace in 10 months in March.Economists forecast that the April deficit narrowed to $49.5 billion in April, according to a survey by FactSet. The Commerce Department will release the report at 8:30 a.m. Eastern time Friday.
The trade gap widened in March to $51.8 billion. That weighed on economic growth in the January-March quarter. Imports rose to a record level, reflecting a higher foreign oil bill. The gain outpaced a solid increase in exports.
A rising trade gap slows growth because it means the United States is spending more on foreign-made products than it is taking in from sales of U.S.-made goods.
The deficit is rising in part because the weaker global economy has dampened demand for U.S. products.
Europe’s debt crisis has worsened in recent months and many economists say the region is already in recession. Europe accounts for almost one-fifth of U.S. exports.
In addition Europe’s troubles, growth in emerging market countries, such as China, has been slowing this year.
Most economists say the U.S. economy is growing at an annual rate of 2 per cent to 2.5 per cent in the current April-June quarter. That’s slightly better than the 1.9 per cent growth in the first three months of the year, but still only modest.
The deficit with China this year is on pace to exceed last year’s gap of $295.5 billion, which was an all-time high for any country.
With millions of Americans still unemployed, political pressure has grown in the United States to impose economic sanctions on China. Critics say China has undervalued its currency against the dollar. Doing so has made
Chinese goods cheaper in the U.S. and American products more expensive in China.
In May, the Obama administration declined in its twice-a-year review of currency practices to cite China as a currency manipulator.
The Treasury Department said that China’s currency was still undervalued and the government needed to make more progress in allowing the yuan to rise in value against the dollar. A cheaper yuan makes Chinese goods less expensive for American consumers while making U.S. products more expensive in China.
U.S. manufacturers expressed disappointment in the decision. They contend that China’s currency is still significantly undervalued against the dollar, giving Chinese exporters an unfair edge.