The deficit is headlined by twin deficits with China and OPEC. From the Commerce Department Press Release:
The April figures showed surpluses, in billions of dollars, with Hong Kong $1.4 ($1.2 for March), Singapore $1.4 ($1.5), Australia $0.8 ($1.5), and Egypt $0.3 ($0.4). Deficits were recorded, in billions of dollars, with China $20.2 ($16.1), OPEC $15.6 ($14.1), the European Union $8.5 ($7.5), Japan $7.6 ($7.5), Canada $7.6 ($6.4), Mexico $6.8 ($6.0), Nigeria $3.4 ($3.3), Venezuela $3.0 ($2.8), Korea $1.3 ($0.8), and Taiwan $0.9 ($0.3).
The twin challenges that must be confronted to bring trade towards balance are energy costs and the effects of mercantilist policies by China, Japan and others.
The mercantilists can be dealt with using import certificates to force trade into balance.
The energy costs are more difficult to address. In the long term, a set of policies that move the US away from dependence on imported energy would be great. In the short term, prices for energy are beginning to force consumers to rethink their consumption decisions. But for more rapid response, a system of tradeable gasoline rations would be more effective. Ray and I have discussed the idea before on this blog.
When I find time, I'm going to do a study of the distributional impact for various versions of the permits. Unfortunately, the distributional politics are apt to be a bit difficult. There are a few states (and individuals) who use very little gasoline. At the upper end things are more tightly clustered. This means that the benefits of tradable permits would probably be concentrated on a few individuals or places, while the costs would be more distributed. However, such a system would tend to benefit the poor, who consume less gasoline. The distributional effects are much more progressive than imposition of a high gasoline tax.
Here is the link for Feldstein's exposition of the idea.
This page gives a sense of how different states stack up.