U.S. trade deficit widened in April

Exports dropped for the second time in three months as the U.S. trade deficit rose to the highest level in nearly two years, a possible sign that Europe's economic troubles are affecting the nation's expanding manufacturing sector. 

The trade deficit widened to $40.3 billion in April, up 0.6 percent from $40 billion in March, according to a Commerce Department report released Thursday. 

The U.S. manufacturing sector is doing the heavy lifting so far in the nation's economic recovery — adding jobs and expanding production through most of 2010.

Exports fell to $148.8 billion in April on drops in consumer goods, foods, feeds and beverages. Farm products fell by $647 million. 

Imports slipped to $189.1 billion while demand for consumer goods, mostly pharmaceutical products, fell by $741 million. 

The trade deficit is running at an annual rate of $466.6 billion, up 25 percent over 2009's $374.9 billion, the smallest trade deficit since 2001. 

The U.S. deficit with China increased 14.3 percent to $19.3 billion, bolstered by sales of computers, household appliances and cell phones, according to the report. Meanwhile, U.S. exports to China dropped 9.4 percent behind decreases in sales of cars and raw cotton.

U.S. relations with China are the focus of congressional hearings this week. 

Earlier Thursday, Treasury Secretary Timothy Geithner said China's exchange-rate policies are impeding the global recovery and provide them an unfair advantage in global commerce. U.S. officials are pressuring Chinese officials to allow the yuan to strengthen, especially at a time when China faces a risk of inflation in goods and prices, Geithner said on Capitol Hill today.