January's deficit is the largest monthly imbalance yet for the US. One reason for it: a surging China.
America's trade deficit has been setting records with such frequency that it seems almost tiresome to hear it again: Another month, another $68.5 billion.
But the gap between what America imports and what it exports is growing so rapidly and relentlessly that it is provoking new concern about how long the world's largest economy can play borrower and consumer to the world.
The issue may take on new urgency in a congressional election year, stoked by news Thursday that the trade deficit hit a new high in January. The monthly record is attributed to a surge in goods from fast-rising China, a tide of imports affecting the beleaguered US auto industry, and an exodus of dollars going to pay for OPEC oil. The huge trade imbalance was top of mind with US lawmakers recently, when they quizzed incoming Federal Reserve Chairman Ben Bernanke about their economic concerns.
Though America's trade deficit has been growing by about $100 billion annually - hitting $726 billion last year - that doesn't necessarily mean a sober day of reckoning is drawing near.
"It's clear that the US trade deficit cannot go on galloping ahead $100 billion a year indefinitely," says Daniel Griswold, a trade expert at the libertarian Cato Institute in Washington. But "it's more likely the adjustments will be incremental rather than jarring."
Even if a soft landing were to eventually occur, the trade deficit would be likely to remain an important issue.
The change, when it comes, could bring a weaker dollar and higher interest rates for US borrowers as foreign willingness to lend dollars to the US ebbs. Moreover, the longer it takes for "global imbalances" to begin a correction, the tougher the adjustment could be.
Each year of gargantuan deficits with trade partners represents another year of erosion for America's economy, because it means US consumers are buying cheaper goods from abroad at the expense of jobs at home, say those who worry about the size of America's trade deficit.
"We're hollowing the economy out," says Charles McMillion, an economist who follows trade patterns at MBG Information Services in Washington. "It's having enormous negative consequences for families and individuals." When IBM sold its personal-computer manufacturing business to China's Lenovo, he notes, that $1.7 billion deal covered only about one day's worth of the deficit.