The New Nation - Internet Edition

AFP, Washington

The global financial implosion took a heavy toll on US trade in September, hitting both imports and exports, according to a government report yesterday underlining the world's economic woes.

In a report that highlights the slowdown in the world's biggest economy and a likely global recession, the Commerce Department said the US trade deficit narrowed 4.4 percent in September to 56.5 billion dollars.

What normally would be seen as an improvement in the trade balance set off alarms with a record drop in imports and and a steep fall in exports.

The data spotlighted weakening economic conditions both in the United States and its trading partners on the eve of a Group of 20 summit of industrialized and emerging nations in Washington aimed at confronting the worst financial crisis since the Great Depression.

Imports showed the steepest drop on record of 5.6 percent to 211.9 billion dollars, led by shrinking oil imports, as American consumers retrenched amid rising unemployment, shrinking investment portfolios and falling home prices.

Exports fell by the biggest amount since September 2001, a month marked by terror attacks, plunging 6.1 percent to 155.4 billion.

"This month's trade figures provided a foretaste of what is to come," said Nigel Gault, chief US economist at IHS Global Insight.

"If we look out over the next 12 months, both export and import volumes will drop-meaning not just slower growth, but outright declines-as the global recession reduces trade activity," Gault said. Joel Naroff of Naroff Economic Advisors, noting the "ominous" export figures, said "the higher dollar and weakening world economy has combined to cut the one sector that had been the bulwark of growth, exports."

The politically sensitive trade gap with China, the largest US trading partner, rose 9.6 percent to 27.8 billion dollars as Chinese imports climbed to a record 33.1 billion dollars.

"Despite the narrowing of the overall trade deficit, the shortfall with China actually expanded," Naroff said.

"Can you say trade tensions with the new administration?" he added, referring to Democratic president-elect Barack Obama, who takes office in January. Critics say President George W. Bush's Republican administration has not been tough enough against China, which they allege manipulates its yuan currency to maintain an unfair trade advantage.

"Nowhere are America's trade policy failures more glaring than on the China front. Our continually rising imports and now worsening exports show that the Clinton-Bush China policies have weakened the nation's economy and productive base," said Alan Tonelson, a research fellow at the US Business and Industry Council.

"President-elect Obama needs to change course quickly by urging swift Congressional passage of a strong currency manipulation bill." The September trade data, reflecting the financial meltdown triggered by the collapse of investment bank Lehman Brothers, came in sharp contrast to record- high July import and export figures.

Falling oil prices and consumption drove crude oil and oil product imports down 15.7 percent from August to 37.0 billion dollars. It was the smallest amount of crude oil imported-253.3 billion barrels-since February 2003.

Among key US trade partners, the US deficit rose 22 percent to 8.3 billion dollars with the European Union, 0.4 percent to 7.8 billion with Canada and 16.7 percent to 5.6 billion with Japan.

The trade gap with the Organization of the Petroleum Exporting Countries fell 30.2 percent to 13.4 billion dollars. For the first nine months of the year, the US trade deficit reached 534.5 billion dollars, up 1.5 percent from the same period in 2007.