The U.S. trade narrowed sharply during March, making its biggest decline in three years, as imports fell and exports climbed to a record level.

The U.S. Commerce Department said today that the gap between what the trade deficit by 9.2% in March to US$54.99 billion, down from the record monthly deficit of US$60.57 billion set in February.

Economists had forecast the deficit to expand to US$61.50 billion.

Despite the improvement in March, the deficit through the first three months of this year is still running at an annual rate of $696 billion, 12.8% higher than the $617.08 billion record set for all of 2004.

The report reflected a 1.5% increase in exports of U.S. goods and services, which rose to an all-time high of $102.2 billion, the fourth straight monthly record.

Imports, which had hit a record high in February, fell by 2.5% to $157.19 billion, reflecting a big drop in imports of foreign cars and in textile and clothing imports from China. That helped offset a big jump in the value of crude-oil imports, which jumped to US$13.41 billion from February’s US$10.94 billion.

The traded deficit with China declined by 7% to US$7.83 billion.

Deficits with other major trading partners were mixed. The deficit with Japan rose to US$7.83 billion from US$6.87 billion in February. The trade gap with the euro area increased to US$6.93 billion from US$6.52 billion. The deficit with Canada fell to US$5.05 billion from US$5.77 billion and the gap with Mexico widened to US$4.26 billion from US$3.67 billion.