WASHINGTON (AP) – The Bush administration insists that its efforts to tear down barriers to sales of American products overseas is the right trade policy.

But the latest news on another record trade deficit is giving critics ammunition to contend that a change in approach is needed.

The Commerce Department reported Friday that the deficit for 2005 jumped to an all-time high of $725.8 billion, up 17.5 percent from 2004 and the fourth consecutive record deficit.

Reaction was swift from Democrats who long have criticized Bush’s drive to strike free trade agreements with countries around the world.

“These trade deficits show that our trade policy is an unbelievable failure that is selling out American jobs and weakening our economy,” said Sen. Byron Dorgan, D-N.D. “If these new trade deficit numbers don’t finally wake up the president and Congress, nothing will.”

Dorgan is pushing legislation that would require Congress to vote every year on whether to renew China’s normal tariff rates with the United States, with the vote resting on China’s willingness to follow global trade rules.

Sen. Charles Schumer, D-N.Y., said the new deficit figures were evidence of a “slow bleeding at the wrists economically for the United States.”

Schumer has won widespread support for legislation that would impose penalty tariffs of 27.5 percent on all Chinese imports unless China stops what critics consider blatant currency manipulation to gain trade advantages.

The new report showed America’s trade deficit with China soared to $201.6 billion last year, the biggest imbalance ever recorded with a single country.

Even some members of Bush’s own party were critical.

Sen. Olympia Snowe, R-Maine, called on the administration to take a tougher approach with China on the currency issue by branding China a currency manipulator in a report the Treasury Department must submit to Congress in April.

That designation would trigger consulations and could ultimately lead to U.S. sanctions against China if America won a case before the World Trade Organization.

On Wall Street, the Dow Jones industrial average took the news on trade in stride, rising by 35.70 points to close at 10,919.05 Friday.

The chief culprit in pushing the deficit up last year was record global oil prices and increased U.S. demand because of a loss of Gulf Coast production following Hurricane Katrina. The U.S. foreign oil bill soared to a record $251.6 billion, up 39.4 percent from 2004.

Imports of other consumer goods including foreign autos hit record levels as well, a development that is causing major woes for U.S. automakers.

Analysts predicted the 2006 trade gap will be even worse, with Global Insight forecasting it could hit $810 billion, reflecting lagging economic growth overseas that could hold back U.S. exports.

“Trade is far and away the largest weight on the U.S. economy at present,” said Mark Zandi, chief economist at Moody’s Economy.com. “This is a risky time.”

The record amounts of dollars that are flowing into foreign hands to pay for imports are being invested in U.S. stocks, bonds and other investments. Economists worry that if foreigners suddenly decide they want to hold fewer U.S. assets, they could send the value of the dollar, stocks and bonds all plunging.

The massive flow of foreign goods into this country has given consumers a wide array of choices at low prices, helping to keep a lid on inflation. But critics contend the trade deficits have contributed to the loss of nearly 3 million manufacturing jobs since mid-2000 as U.S. companies moved production overseas to lower-wage nations. Many economists believe those manufacturing jobs will never come back.

In an effort to counter economic anxiety, Bush included in his new budget an American Competitiveness Initiative to double government spending on basic research, extend tax breaks for company spending on research and hire thousands of new math and science teachers for the nation’s high schools.

Commerce Secretary Carlos Gutierrez, touring an IBM facility in North Carolina, said Friday that the administration’s policy of emphasizing such things as expanded access for U.S. exports in countries such as China was the better approach.

“We can’t overreact and make tactical choices that will hurt our economy,” Gutierrez said.

Last year, imports rose by 12.9 percent to an all-time high of $2 trillion, swamping a 10.4 percent increase in exports, which reached a record high of $1.27 trillion.

For December, the trade deficit edged up a slight 1.5 percent to $65.7 billion, the third highest monthly figure on record.

In addition to China, the United States ran up record deficits with much of the rest of the world including Japan, the European Union, OPEC nations, Canada, Mexico and Central and South America.