Trade gap up on higher oil

NEW YORK (CNNMoney.com) -- The gap between imports and exports increased in May, according to a government report Thursday that showed rising oil prices outstripping record exports.

Imports topped exports by $60 billion in the month, up from the $58.7 billion gap in April. The gap was in line with the forecast of economists surveyed by Briefing.com.

Much of the rising gap was due to oil prices, as the average price of a barrel of imported oil rose 3.6 percent to $59.36. But even the part of the gap not attributed to oil rose by 1 percent in the month.

Exports rose 2 percent in the month to a record $132 billion, while overall imports also rose 2 percent to $192.1 billion.

Nearly a third of the gap was due to the trade imbalance with China. The gap between goods imported from and exported to China rose to a record $20 billion in the month, up 3 percent from the gap in April and up 12 percent from a year earlier.

The trade gap with China has been getting increased attention in recent months, not only because of the impact on U.S. manufacturers competing with Chinese goods, but also because of questions about the safety of a range of Chinese imports, ranging from toys to seafood, toothpaste and animal feed.

The Chinese government recently announced that nearly 20 percent of all food and consumer goods it examined in a survey were substandard or tainted.

Critics of the U.S. trade relations with China said that beyond the questions about the safety of Chinese products, the latest report showed the damage being done to the U.S. economy by imports.

"Trade with China contributes nearly as much to the trade deficit as petroleum, making the yuan-dollar exchange rate as important as the price of oil for the size of the trade deficit and the outlook for U.S. GDP and jobs growth," said University of Maryland professor Peter Morici. "To finance trade deficits, Americans have borrowed $6 trillion, over and above foreign direct investment in the United States, and the debt service comes to about $300 billion a year."

Other economists argued the U.S. economy benefits in the long-run from having access to lower priced imports, and that the latest trade report shows strong demand for goods by U.S. consumers, suggesting a strong economy.

"The trade data make exports look stronger, which is good news. Meanwhile imports signal improved US growth," said Robert Brusca of FAO Economics. "This is a good report all around."