In upcoming talks with China, the United States will try for what seems like the 1,000th time to encourage China to let its currency, the yuan, appreciate quicker, even as a growing list of sponsors add their name to a U.S. House bill, The New York Times (NYT) reported, that would require the Obama administration to impose duties or other trade barriers in lieu of currency action by Beijing.

China keeps the yuan in a tight trading band, arguing that it must keep the yuan valued at a low level to protect embryonic companies and sectors.

The United States argues that the yuan's artificially-low value unnaturally draws in trade revenue via cheap exports that, under a market-value yuan, would flow to other countries.

The news on the import/export front is not good. The Commerce Department reported that our trade deficit widened to $49.90 billion in July, a 21-month high. Economists surveyed by the Wall Street Journal had expected the deficit to come in at $42.7 billion.

The wider deficit was caused by a increased imports and a drop in exports. Exports shrank by 1.3% to $150.45 billion, while imports jumped to 3.1% to $200.35 billion, up from $194.42 billion.

Reaction to stronger-than-expected earnings from Alcoa (AA) may be put to the test by economic data. Tuesday's data includes the U.S. trade deficit, which grew unexpectedly during May. Driven by a large jump in imports from China, the trade gap widened 4.8% to $42.3 billion, the largest gap since November 2008. The Street expected to see the gap narrow to $39.0 billion during May.

Digging into the numbers a bit, U.S. imports increased 2.9% to the highest level since October 2008; a 12.1% increase in shipments from China helped push this number higher. U.S. exports increased 2.4% in May, which was the best gain since September 2008. This increase was driven by large gains for industrial supplies and materials, along with capital goods and smaller increases for cars and consumer goods.

Do you want the good news (if there is any) or the bad news? Following Alcoa's (AA) earnings disappointment and the warnings from Chevron (CVX) and Electronic Arts (ERTS), the Commerce Department reported that the trade deficit with China widened more than expected during November.

The deficit grew 9.7% in November to $36.4 billion, outpacing the consensus forecast for a deficit of $34.8 billion. Exports increased for the seventh straight month; unfortunately, imports increased at a faster pace during November.

According to the Commerce Department, the U.S. trade deficit narrowed by 7.6% in October to $32.9 billion as exports increased faster than imports. Analysts had expected the trade gap to widen to show a deficit of $37 billion. The trade deficit for the year now stands at $304 billion, which is down from $610.8 billion this time last year.

The biggest reason for the lower deficit was a decrease in the importing of crude oil. That said, the trade deficit with China continued to increase, expanding to $22.7 billion in October, compared to $22.1 billion in September. The current deficit with China is at its highest level since last November. The year-long deficit with China is now $188.5 billion.

The only thing that has been devalued faster than our precious dollar is the perpetual slide in government credibility. Over the years we have heard countless times about the importance of a strong dollar from our leaders.

"Our administration believes in and will do everything in its power to support a strong dollar" or something like this has been spewed out by Republicans and Democrats alike, yet there is little evidence that the policies put in place over the past century have done anything of the sort. Perhaps there was one person that took the heat and did the right thing -- Paul Volcker, during the Carter administration, who had to deal with dizzying inflation.

There's always good news, if you're willing to look hard for it. So, even though consumer sentiment dropped as unemployment rose, you can find the seeds of economic recovery in some of the U.S. import and export data reported recently.

Consumer sentiment fell early this month, largely because of the grim outlook for the job market. Consumers don't see a recovery coming anytime soon, with economists saying that unemployment has yet to peak despite having hit 10.2% already. Hopes edged higher in September when imports were seen to be on the rise, but sentiment starts and ends with jobs.

In August, the U.S. trade deficit showed an unexpected drop of 3.5%. This shrinks the deficit to a mere $30.7 billion – rather than the $33 billion economists expected. Oil prices surged, but the amount of shipments fell precipitously. The increase in exports suggests that the global economy is working its way out o the doghouse.

Exports of goods and services pushed 0.2% higher in August to $28.2 billion. This was the fourth consecutive month of increases. American farm products, cars and parts, industrial engines and telecommunications equipment sales all contributed to the small upward move.

How do we know that world trade is loosening up? One indication is the U.S. trade deficit. Unfortunately the U.S. has been running a growing trade deficit for the past two months. You may be asking, what causes our trade deficit? The U.S. trade deficit is caused by importing more goods than we export. In April the trade gap widened by 2.4% from March to $29.2 billion. This follows a 10-year low in February.

The trade gap narrowed by 53% from a year ago when world trade collapsed from the global recession. The slight gains in the past two months indicate that some improvement is occurring in world commerce.

Many economists agree the U.S.'s pronounced recession, and the global recession, to some degree, were triggered by a series of imbalances. One of those imbalances is correcting now.

The U.S. trade deficit declined again in December 2008, by 4%, to $39.9 billion -- the lowest level since February 2003 -- on a substantial decline in imports, the U.S. Commerce Department announced Wednesday.

Further, for all of 2008, the trade deficit narrowed to $677.1 billion from $700.2 billion in 2007. In 2008, exports increased 12% to $1.84 trillion, while imports climbed 7.4% to $2.52 trillion.

The previous U.S. presidential administration preached a great deal about a 'strong dollar policy.'

Unfortunately, almost no actions practiced by the administration supported that goal.

Concerning the federal budget, a decade of deficits has really hurt the dollar's value. A $1.3 trillion tax cut in 2001 ended the balance budget era of the late 1990s, and subsequent increases in defense spending for the Iraq and Afghanistan Wars -- combined with a lack of a tax increase to pay for that additional spending -- soon led to +$200 billion budget deficits. After swelling to $300 billion, the bank bailout and related legislation would push the deficit over $500 billion, according to the Congressional Budget Office, and it's projected to top $1 trillion this year and in fiscal 2010.

Oh, relax, it's only January.

That was one China expert's evaluation of the impact of U.S. Treasury Secretary-designate Timothy Geithner's comment that he believes China is "manipulating" its currency.

China's currency, the yuan, which China allows to trade in a tight band, and not float freely in the currency market, has long been been viewed by Congressional lawmakers, business executives, and analysts as a tactic by China to artificially depress the value of its goods, in order to increase exports sales. Critics argue China is creating an unnatural competitive advantage for its companies. The yuan closed Thursday at 6.8380 to the dollar.

China counters that it must keep its currency fixed to protect its young, immature industries and developing economy.

Taking it with a grain of salt

Further, while the Bush administration did not push the currency issue much with China, and Geithner's comments suggest otherwise, economist David H. Wang, a China expert, said China is likely to disregard Geithner's comments.

"China's leaders have developed an increasing sophistication regarding the American political system," Wang said. There is a phrase you hear a lot now in Beijing that translates roughly to 'Don't pay attention to any comments from America from November thru January.' And, for the most part, that's a good rule to follow."

Can the U.S. government run $1 trillion budget deficits for two, three years? Indeed it can, Financial Times columnist Martin Wolf argues, and the deficits can even be higher, for a while. After that, there's more work ahead.

The specter of $1 trillion budget deficits may be vociferously opposed by Republicans and other economic conservatives, but Wolf, in so many words, says what other choice does the United States have? What would be the alternative? Simultaneously raising taxes now to lower the deficit? Hardly prudent. Doing nothing? Another dreadful idea. So, it's prime the pump, or sit there at the well and await nothing.

Up ahead: two bigger tasks

What's more, Wolf sees two additional tasks (structural changes) that are just as important to the goal of U.S. economic recovery -- but that may be even harder to implement: removing toxic assets from the banking system and reducing the U.S.'s structural current account deficit (the trade deficit).

The first is the forced write-off of bad assets, fiscal recapitalization of the banks, or debt-for-equity tactic, and it should be done comprehensively and quickly. Slow, gradual bad-debt reduction is not the correct policy, Wolf argues, as it would delay the economic recovery.

There have been almost no positives in the U.S. recession that has resulted in millions of job losses, and also hurt corporate revenue and earnings, most economists agree.

But at least one metric has moved in the correct direction: the U.S. trade deficit, which declined 29% in November 2008 to $40.4 billion on a record decline in imports, the U.S. Commerce Department announced Tuesday.

Economists surveyed by Bloomberg News had expected the November 2008 trade deficit to total $51.5 billion.

Imports declined a record 12% to $183.2 billion -- the lowest level in more than two years -- pushed lower by a large drop in imported oil prices.

Exports dropped 5.8% to $142.8 billion, on declining demand for industrial supplies and capital goods. The October 2008 trade deficit was revised lower to $56.7 billion from the previously released $57.2 billion.

During the past four years, as gasoline first soared above $3, then $4, the United States transferred more than $2 trillion is wealth to oil producing nations, to which OPEC says, "Thank you very much."

However, in recent months, the price of oil has collapsed with the onset of the U.S. and global recessions, and oil now appears destined to test $30 per barrel - - and probably lower levels - - in the year ahead. Oil traded Wednesday down $1.53 to $37.43 per barrel, with regular unleaded gasoline averaging about $1.55-$1.75 nationwide. Incredibly, the stunning turn of events in the oil market means that energy from crude is now 'comfortably priced.'

Still, with three oil shocks (1973-74, 1979-80, 2007-08) having contributed to or directly causing three U.S. recessions, oil's drift back toward 'comfortable' levels re-opens the door for a policy debate: namely, should the U.S. let its economy remain vulnerable to prices swings in this volatile commodity or should it consider a tax to fund alternative energy sources for transportation.

Is a $10 oil tax up ahead?

Economist Peter Dawson said it seems almost unfathomable that the American people and Congress would be willing to ship $100 per barrel (or more) in oil revenue to foreign governments, and not to its own government, but that is precisely the case.