February trade deficit increases to $39.7 billion

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The U.S. trade deficit widened more than expected in February as a small gain in exports to the highest level in 16 months was offset by a bigger jump in imports, reflecting increased demand for consumer goods from televisions to clothing.

The wider deficit was a sign of a rebounding U.S. economy. Economists expect the trade deficit to rise this year but hope that expanding exports will continue to lift the fortunes of American manufacturing companies.

The Commerce Department reported Tuesday that the deficit for February increased 7.4 percent to $39.7 billion. That was larger than the $38.5 billion deficit economists had expected. Exports edged up 0.2 percent while imports jumped 1.7 percent.

The politically sensitive deficit with China fell to $16.5 billion in February, the lowest level in 11 months, but was still the biggest trade imbalance the United States has with any country. The slight improvement was not likely to lessen pressure on the Obama administration to impose trade sanctions on China unless the country begins to allow its currency to start rising again in value against the dollar.

President Barack Obama brought up the currency issue in talks on Monday with Chinese President Hu Jintao, who was in Washington for a nuclear security summit.

Hu, in a statement released in Beijing on Tuesday, rejected U.S. calls for China to allow its currency to rise in value against the dollar. Reforms of China’s currency system “won’t be advanced by any foreign pressure,” Hu said in those remarks.

Hopes for an imminent change in China’s current system of tightly linking the yuan to the dollar had been boosted following a surprise stop last week by Treasury Secretary Timothy Geithner in Beijing for talks with Chinese economic officials on his way back to Washington from India.

Treasury officials said they would have no comment on Hu’s statement Tuesday on the currency issue, pointing reporters to what White House officials had said about the Hu-Obama meeting on Monday.

Jeff Bader, director of Asian affairs on the National Security Council, told reporters that Obama had reaffirmed in the meeting the administration’s view that China needs to move to a more flexible exchange rate as an “essential contribution” to the goal of a sustained and balanced global recovery.

Associated Press