No Quick Fix for Trade Gap

"Right now we have a voracious appetite and the rest of the world keeps setting the table -- and paying the bill -- for us," he said. "The typical reversal begins with a combination of slower GDP growth, rising interest rates, and a depreciating exchange rate."

Economists estimate that GDP growth will be cut by about half a percentage point in the fourth quarter as a result of the burgeoning deficit. And the economy could take a further hit in 2005.

"The much touted 3.5% GDP forecasts for the U.S. economy in 2005 could be cut down [by] as much as 0.7% to 0.8%," said Ashraf Laidi, chief currency analyst at MG Financial.

Although the rise in imports recently is likely to raise fears about higher inflation, economists say there's no reason to panic.

"We haven't yet seen a huge feed-through from import prices," noted Matus. "I suspect importers and exporters are squeezing their margins in order to keep price increases from flowing through to the consumer."

Ian Shepherdson, chief economist at High Frequency Economics, said he believes the deficit probably narrowed by as much as $5 billion in December as oil prices declined. Oil imports surged 17.7% in November.

In addition, he said the decline in exports "makes no sense" and was probably affected by "some sort of seasonal adjustment problem."

The trade numbers Wednesday are likely to increase tensions between the U.S. and China. Although the gap with China narrowed for the first time in nine months in November, it still stands at a whopping $147.7 billion for the year.

The U.S. has criticized China for keeping its currency pegged to the dollar. If the Chinese yuan were allowed to float freely, economists say its value would shoot up, making exports from that country more expensive.

While this could help to narrow the trade gap, it also could mean higher U.S. interest rates, as China's central bank has been using the profits from exports to buy government Treasuries.