America’s trade deficit swelled to an all-time high of $55.5 billion in October as imports – including those from China – surged to the loftiest levels on record. Skyrocketing crude oil prices also contributed to the yawning trade gap.

The latest snapshot of trade activity, reported by the Commerce Department yesterday, showed the country’s trade imbalance widening by a sizable 8.9% in October from the previous month – despite the fact that American exports registered their best month on record.

The growth in imports, however, dwarfed the pace of exports in October, producing another bloated trade gap. The trade deficit was much bigger than the $52.4 billion imbalance economists were forecasting.

Imports of goods and services climbed to a record high of $153.5 billion in October, representing a 3.4% increase from September.

America’s politically sensitive trade deficit with China clocked a record $16.8 billion as imports flowing from the country posted all-time highs.

“The shortfall with China grew for the eighth month in a row … as Americans start to fill up stockings with Chinese-made toys, games, sporting goods, electronics, and computer accessories,” said the chief economist at BMO Nesbitt Burns, Sherry Cooper.

The Bush administration has been pressing China to let the value of its currency, the yuan, be set in open markets. American manufacturers claim that Beijing’s currency policies give Chinese companies a big competitive advantage over American companies.

Another factor in October’s trade deficit was surging prices for imported crude oil. The average price of crude oil soared to a record $41.79 a barrel – a whopping 11.1% increase from September’s price.

American exports, meanwhile, rose by 0.6% in October from the previous month to a record $98.1 billion. Sales of American-made industrial supplies to other countries totaled a record high of $18 billion. Exports of capital goods, including drilling equipment and airplanes, also gained ground.

The Bush administration believes the best way to handle the mushrooming trade deficits is by getting other countries to remove trade barriers and open their markets to American businesses.

But Democrats and trade unions argue that the president’s free-trade policies aren’t working and have contributed to the migration of jobs overseas. Critics contend that trade deals ought to include stronger protections for workers and to protect the environment.

The previous record high American trade deficit of $55.3 billion was recorded in June.

Persistent concerns in Europe over the American trade and budget deficits has been a key factor in the American dollar’s recent slide – on several occasions to record lows – against the euro, the currency used by 12 countries.

The value of the dollar, which had already been weakening, helps American exporters and manufacturers because it makes their goods and services cheaper and more competitive to foreign buyers.

Although the administration espouses a “strong dollar” policy, it hasn’t taken specific action to break the dollar’s decline. Private economists say that’s because the administration is fine with what has so far been a relatively orderly decline in the dollar.

America’s trade deficit with Canada grew to $5.6 billion in October, a 7.8% increase from September. America’s trade imbalance with Mexico surged by 15.4% to $4.4 billion in October as imports from the country hit record highs.

America’s trade deficit with oil-producing nations, including Saudi Arabia and Venezuela, clocked a record $7.2 billion in October as imports from these countries hit all-time highs.

America’s deficit with Japan, however, narrowed in October to $5.9 billion as U.S. exports to Japan were the highest since March 2001.