Trade deficit continues to dwindle

? The U.S. trade deficit declined to $39.21 billion in August, the smallest gap in six months, reflecting a big drop in imports of cars and foreign oil.

However, America’s trade deficit with China surged to an all-time high, a development certain to add to the pressure in Congress to punish China for what critics contend are the country’s unfair trade practices.

The Commerce Department reported Friday that the August deficit was 2.1 percent lower than a revised July imbalance of $40.03 billion. That caught analysts by surprise because they had been forecasting the deficit would widen in August.

The improvement reflected big declines in imports of cars, auto parts and oil which helped to offset a smaller drop in U.S. exports. That was the result of a plunge in shipments of civilian aircraft.

The decline in August represented the fifth straight month that the deficit had improved after hitting a record monthly high of $42.98 billion in March.