U.S. Trade Deficit Hits Eight-Year High

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WASHINGTON, D.C.: China will soon displace Japan as the country with the biggest American trade surplus if the U.S.'s trade imbalance continues to grow at its current rate. The Commerce Department Thursday reported that the trade deficit shot up to $10.9 billion in May, 13.2 percent higher than the month before and far worse than had been expected. While the imbalance with China jumped 31 percent to $3.06 billion, Japan's deficit declined 23.7 percent, to $3.13 billion. Although there was a record number of exports, it was not enough to offset the number of imports fueled by a growing demand for foreign cars, toys and games, creating the largest trade imbalance in eight years. TIME Washington correspondent Lewis Simons reports that the trend toward a vast trade disparity with China bodes poorly for the U.S. economy: "This shift from Japan to China is a warning, an alarm bell. The potential that China will be a source of cheap exports and lost American jobs far surpasses that potential from Japan." Japan's economy has increasingly matured, Simons says, and is not nearly the economic threat that China is becoming, given its large population of 1.2 billion people. "China's economy is just taking off," he says, "and the consequences of such a trend are severe." -->