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Summary:
In 2005 the United States incurred a record merchandise trade deficit of $766 billion on a census basis and $782 billion on a balance-of-payments basis (BoP). A surplus in services trade of $58 billion gave a deficit of $724 billion on goods and services (BoP) for the year -- up $108 billion or 17.2% from the $618 billion deficit in 2004. In 2005, U.S. exports of goods and services totaled $1.272 trillion, compared with $1.151 trillion in 2004 and $1.023 trillion in 2003. In 2005, U.S. imports were $1.996 trillion, compared with $1.769 trillion in 2004, and $1.517 trillion (balance of payments basis) in 2003. The trade deficit in goods and services at $724 billion, was 17% higher than the $617 billion in 2004. Year-to-date (March 2006), the trade deficit in goods and services at $196.2 billion was up $24.1 billion from the same period in 2005. Since 1976, the United States has incurred continual merchandise trade deficits. They increased dramatically from $36.4 billion in 1982 to a peak in 1987 at $159.6 billion. The deficit dropped to $76.9 billion in 1991 but rose to $452.4 billion in 2000 and to $781.6 billion in 2005 (Balance-of-payments basis). Overall U.S. trade deficits reflect a shortage of savings in the domestic economy and a reliance on capital imports to finance that shortfall. Capital inflows serve to offset the outflow of dollars used to pay for imports. Movements in the exchange rate help to balance trade. The rising trade deficit (when not matched by capital inflows) places downward pressure on the value of the dollar which, in turn, helps to shrink the deficit by making U.S. exports cheaper and imports more expensive. Central banks in countries, such as China and Japan, however, have intervened in foreign exchange markets to keep the value of their currencies from appreciating significantly against the dollar. Trade deficits are a concern for Congress because they may generate trade friction and pressures for the government to do more to open foreign markets, to shield U.S. producers from foreign competition, or to assist U.S. industries to become more competitive. As the deficit increases, the risk also rises of a precipitous drop in the value of the dollar and disruption in financial markets. The broadest measure of U.S. international economic transactions is the balance on current account. In addition to merchandise trade, it includes trade in services and unilateral transfers. In 2005, the current account deficit rose to $804.9 billion from $668.1 billion in 2004. After reaching a peak of $160.7 billion in 1987, the current account deficit fell steadily through 1991, when it attained a surplus of $3.8 billion, before turning into deficit again. Higher oil prices and more imports are expected to continue to worsen the current account deficit in 2006. In trade in advanced technology products, the U.S. balance dropped from a surplus of $32.2 billion in 1997 to a deficit of $44.4 billion in 2005. In trade in passenger automobiles, the $93 billion U.S. deficit was mainly with Canada, Germany, Korea, Japan, and Mexico. In imports of crude oil, major sources of the $176 billion in imports were Venezuela, Saudi Arabia, Canada, Mexico, and Nigeria.
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