WASHINGTON, Feb 10: The US trade deficit hit a new record in 2005 on surging oil imports and a big jump in Chinese imports, data showed on Friday, prompting fresh economic concerns and protests about China’s trade practices.

The Commerce Department said the goods and services deficit widened in December to $65.7 billion, bringing the gap in 2005 to a record $725.8 billion.

John Lonski, an economist at Moody’s Investors Service, said the growing US trade imbalance “could quickly slow the US economy or push it to a recession if foreigners demand higher interest rates.”

Lonski said the growth in outsourcing to China and other low-cost emerging markets “is inevitable” and makes it hard to narrow this deficit.

“To be frank, the only means of quickly bringing about a narrowing of the US trade deficit would be via an outright recession in the US,” he said.

The deficit for the year was up 17.5 per cent from that of 2004, which had set a record at $617.6 billion.

As a percentage of US gross domestic product (GDP), the deficit increased from 5.3 per cent in 2004 to 5.8 per cent in 2005.

Economists fear the growing trade deficit could create economic shockwaves by putting further pressure on the dollar.

The report “was a modest negative for the dollar, if only by reminding markets of the weak fundamentals that still underlie the greenback,” said CIBC World Markets Economist Avery Shenfeld.

The politically sensitive deficit with China widened to $16.3 billion in December and totalled $201.6 billion for 2005, up 24.5 per cent for the year.

The news drew an immediate protest from Senator Olympia Snowe, who wrote Treasury Secretary John Snow to demand that Washington label China “a currency manipulator” that could trigger sanctions.

“The Chinese government continues to intervene in foreign exchange markets to intentionally undervalue its currency, which makes Chinese exports to the US cheaper and US exports to China more expensive,” the senator said.—AFP