AAP

The US trade deficit narrowed more than expected in March on a record plunge in imports, even as average oil prices surged to a new high, a Commerce Department report showed.

The trade gap shrank to $US58.2 billion ($A61.7 billion) in March, down 5.7 per cent from a revised estimate of $US61.7 billion ($A65.42 billion) in February, previously reported as $US62.3 billion ($A66.05 billion). Wall Street analysts had expected the March gap to narrow to $61.3 billion.

A $US6.1 billion ($A6.47 billion) drop in imports to $US206.7 billion ($A219.15 billion) was the biggest on record. It was also the biggest percentage drop since December 2001, only months after the attacks on the United States which took a big toll on trade.

In a sign the current US economic slowdown is taking a toll on consumer and business demand, major import categories like autos and auto parts, industrial supplies and materials, consumer goods and capital goods all showed declines in March.

"The trend in the trade deficit has been down due to slowing domestic demand that has curbed imports," said James O'Sullivan, economist with UBS Securities LLC in Stamford, Connecticut.

The bigger-than-expected trade figures could drive a slight upward revision to first quarter economic growth, he said.

The dollar pared losses against the euro in early trading after the report. The generally weak dollar has helped boost demand for US goods abroad and prompted cries from European officials that the currency has fallen too much.

Prices for US Treasury bonds held onto their earlier gains, reacting little to the trade data. Traders were focused instead on a fresh wave of negative news in the financial sector.

Average oil prices jumped more than $US5 ($A5.30) per barrel in March to $US89.85 ($A95.26). As prices have moved skyward, the volume of oil imports fell in March to 8.99 million barrels a day - the lowest since February 2003 and well below the 2007 average of 10.1 million.

US exports retreated in March, but were still the second highest on record at $US148.5 billion ($A157.44 billion). Auto exports showed the biggest decline, followed by industrial supplies and materials and consumer goods.

Before the March decline, US exports had set records in 12 consecutive months - helping to keep the US economy afloat during a time of turmoil brought on by a housing slump and spreading liquidity crisis.

"In general, the narrowing trade gap has reflected a rise in exports, helped by a weaker dollar and higher demand outside of the US," O'Sullivan said.

The closely-watched US trade deficit with China narrowed to $US16.1 billion ($A17.07 billion) in March, the lowest in two years as US exports to that country grew 10 per cent to their second highest on record.

US exports to the European Union and Central and South America set a record in March. Imports from Canada also set a record during the month.