U.S. trade deficit at 15-month high

Americans spent $40.4 billion US more on imported goods than they earned in exports in March, the U.S. Commerce Department reported Wednesday.

Economists saw the 2.5 per cent increase in the trade deficit — to a 15-month high — as a sign of a rebounding economy and rising demand.

Earnings from increased exports of farm products and heavy machinery ranging from electric generators to earth-moving equipment were offset by the higher prices for imported oil and gas.

The deficit with Canada, America's largest trading partner, fell by 15.8 per cent to $2.3 billion.

The deficit with China rose 2.4 per cent to $16.9 billion, its highest level since January and the largest trade gap with any country.

The White House has been facing growing political pressure to impose trade sanctions on China if Beijing doesn't allow its currency to rise in value against the dollar.

Treasury Secretary Timothy Geithner was expected to raise the issue when he and Secretary of State Hillary Clinton go to China for two days of high-level talks later this month.

U.S. exports should be helped by a strengthening global economy, but the question is how the debt crisis in the 16 countries of the eurozone — which buy 15 per cent of American exports — will affect trade.

"The outlook for exports has been dampened by the fiscal crisis in Europe, which has reduced the prospects for overseas activity," said Paul Dales, senior economist at Capital Economics.

So far this year, the U.S. deficit is running at an annual rate of $467.2 billion, 23.4 per cent higher than last year's imbalance of $378.6 billion.