Trade deficit surged in November

Congress is considering bills that would clear the way for economic sanctions on China if it does not allow its currency to rise in value more rapidly against the U.S. dollar. American manufacturers contend the Chinese are manipulating their currency by keeping it undervalued by as much as 40 percent to gain price advantages against U.S. firms.

The Chinese warned last month during high-level economic talks that U.S. sanctions could spark retaliation by China. Commerce Secretary Carlos Gutierrez said Friday that the administration continues to believe that its strategy of emphasizing dialogue along with filing selected trade cases against China at the World Trade Organization represents a better chance of addressing the deficit.

He said the best thing that Congress can do is pass the three pending free trade agreements with Colombia, Panama and South Korea as a way to expand U.S. export opportunities.

“Right now the best idea that is in front of us is passing those three free trade agreements,” Gutierrez said in an interview with The Associated Press. “That is the single biggest thing that we can do to help our exporters.”

The growth in exports has been a major factor cushioning the blow to the economy from the slump in housing and a severe credit crunch. However, with oil pushing imports up sharply, analysts believe the help from trade in the final three months of last year will be shown to have been significantly smaller.

Many economists believe overall economic growth slowed to a barely discernible 1 percent annual rate in the October-December period and will likely weaken even further in the current quarter, raising fears of a possible recession.

The administration and Democrats in Congress are considering putting forward economic stimulus packages to ward off a downturn, and on Thursday Federal Reserve Chairman Ben Bernanke said the Fed was prepared to act in a “decisive” manner to protect the economy, comments viewed as a strong signal of further Fed rate cuts.

By country, the deficit with Canada, America’s largest trading partner, dropped by 12.1 percent to $4.7 billion in November while the imbalance with Mexico rose by 1.4 percent to $7.6 billion. The imbalance with the European Union fell by 12.6 percent to $10.4 billion.

MORE FROM STOCKS & ECONOMY

Stocks & economy Section Front

Bailout for Main Street instead of Wall Street? Stocks close higher after trade deficit narrows Europe leads in bonus crackdown, is U.S. next? New jobless claims rise, trade gap narrows Mortgage relief slow in coming to many Geithner: TARP extension sets stage for end Americans’ net worth rises for second quarter Natural gas surges after U.S. stockpiles drop Trade gap narrows unexpectedly in October Foreclosure activity falls for fourth month Stocks & economy Section Front   Add Stocks & economy headlines to your news reader: