The administration is pushing China to move more quickly to allow its currency to rise in value against the dollar as a way to narrow the yawning trade gap by making American exports cheaper in China and Chinese goods more expensive for US consumers.

Congressional critics of China's trade policies have warned that if China does not act, they plan to push for a Senate vote before the end of this month on legislation that would impose 27.5 percent penalty tariffs on all Chinese imports.

That would drive up the price American consumers would have to pay for Chinese clothes, toys and consumer electronic products, but supporters of the legislation contend a strong U.S. response is needed to force China to stop manipulating its currency to gain unfair trade advantages.

The big jump in America's oil bill reflects the sharp rise in global oil prices. The average price for a barrel of imported crude oil rose to a record of US$64.84 in July while the spot price in global oil markets surged even higher to US$77 per barrel.

However, since setting a record in mid-July, crude oil prices have come down by about 13 percent, raising hopes that the trade deficit will start to improve in coming months.

American exporters have been helped by a decline in the value of the US dollar against many major currencies and an improved economic outlook in Europe and Japan.

The drop in exports in July was led by a US$1.2 billion decline in sales of US capital goods, reflecting declines in shipments of civilian aircraft, computers and computer accessories and industrial machinery.

While the deficit with China narrowed slightly, America's trade deficit with Japan rose by 8.1 percent in July to US$7.6 billion.

The deficit with Canada, America's biggest trading partner, edged up to US$5.9 billion while the imbalance with Mexico narrowed to US$5.1 billion. The deficit with the 25-nation European Union jumped to US$13.4 billion, up from US$9 billion in June.

1

2