US March trade gap sets record at $30bn

The US trade deficit hit a record $30.2 billion (€33.8 billion) in March, as prices of imported oil rose to levels not seen since the Gulf crisis of 1990, the Commerce Department said yesterday. The trade deficit rose 5.1 per cent from February's $28.7 billion as imports of crude petroleum rose to a record $7.6 billion and the price of crude oil rose to an average of $26.38 a barrel. That was the highest since oil prices averaged $29.51 in November 1990.

The data come just days before a key vote in the bitterly divided US House of Representatives on granting trade benefits to China. While the US deficit with China shrank in March, the overall trade deficit was larger than expected and could harden the stance of some lawmakers who are against permanent normal trade relations with Beijing.

The trade gap, which topped the $29.4 billion forecast by economists, helped to weaken the dollar and depressed US bond prices. With oil prices so high, the US deficit with OPEC nations hit a record $4.2 billion. The increase helped push overall imports to a record $117.4 billion, from $113.6 billion in the previous month. "The trade deficit is continuing to widen with the growth in the US exceeding the growth of its major trading partners," said Ms Marilyn Schaja, money market economist at Donaldson, Lufkin and Jenrette Securities in New York.

The inflation-wary Federal Reserve has raised interest rates six times - most recently earlier this week - in an attempt to cool the remarkably strong economy.

One reason that inflation has remained subdued in recent years has been weakness in overseas economies. But with a broad recovery underway in Europe and Asia, the US central bank is watching for signs of rising inflation.