By Peter Morici On Thursday, the US Commerce Department reported that the June trade deficit on goods and services was US$64.8 billion, down from $65 billion in May but up from $63.3 billion in April.
The petroleum deficit fell to $24.7 billion in June from $25.8 billion in May, but was up from $21 billion in April. Prices rose in June but import volumes fell. The oil-import bill is likely to rise in July and August, because of conditions in Middle East markets and the shutdown of significant production in Alaska. Also, imports from China continued to rise.
Tightening conditions in international oil markets and rising imports from China will soon push the United States' annual trade deficit to $800 billion, imposing a significant drag on economic growth.
The trade deficit must be financed by foreigners investing in the US economy or lending Americans money. Direct investment in US property and productive assets provides only a small portion of the needed funds, and the balance is obtained through the sale of Treasury bonds, corporate bonds, bank accounts and other paper assets. Americans borrow nearly $60 billion each month to consume more than they produce. The total debt will exceed $6 trillion by the end of 2006.