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Trade gap widens on record deficit with China

By Annalyn Censky, staff reporter

NEW YORK (CNNMoney.com) -- The U.S. trade gap widened to $46.3 billion in August, driven by a record-breaking deficit with its largest trading partner China.

The trade balance, which measures the difference between the nation's imports and exports, widened from $42.6 billion in July, according to a government report released Thursday.

Economists had expected the deficit to narrow to $44.5 billion during August, according to Briefing.com.

As the U.S. trade deficit has deepened, China is running a trade surplus. On Wednesday, China announced a surplus of $16.9 billion for September, down slightly from its $20 billion surplus in August.

But the U.S. ran up a record-high $28 billion deficit with China in August.

"The jump in bilateral trade with China to a record high will fuel growing fears of a currency war," Paul Dales, a U.S. economist with Capital Economics said in a research note.

The growing imbalance between U.S. exports and imports has dragged down economic growth and also lead to more job losses in the manufacturing sector.

In an effort to boost the U.S. economy, President Obama said earlier this year that he hopes to double exports in the next five years, creating an estimated two million jobs domestically.

But economists are questioning whether that goal may be too lofty, especially as the possibility of a so-called trade war with China and Japan has recently entered the spotlight.

"Calls for action against China are only likely to get louder," Dales said.

Last month, concerns about what the low value of the yuan means for U.S. manufacturers prompted Congress to pass a bill that would allow for tariffs on Chinese goods.

U.S. leaders have accused China of keeping its currency, the yuan, undervalued by buying up foreign currencies, and Japan recently intervened in markets for the first time in six years to weaken its currency, the yen.

An undervalued currency keeps exports cheap and competitive, giving manufacturers in those countries an edge when competing for international business.  To top of page

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