Sky-high oil prices and Americans' insatiable hunger for Chinese goods drove the US trade deficit to a record high of $763.6-billion dollars in 2006, the government said on Tuesday.

The Commerce Department said the December gap alone was $61.2-billion, up from $58.1-billion in November. It was the highest monthly total since September's $64.4-billion.

Economists said the deficit was likely to have peaked for now, with oil prices well down from all-time highs above $78 a barrel reached in mid-2006.

"And with foreign economic growth still looking strong and helping exports, the non-oil deficit will likely edge lower too," Global Insight US economist Nigel Gault said.

But Democrats warned there was still a financial reckoning to come, given that the United States needs large dollops of foreign cash to fund its spending binge on imported goods.

"Someday the bill is going to come due, whether this administration admits it or not," said Senator Charles Schumer, the chairperson of the joint economic committee in Congress and a fierce critic of China's trade regime.

"The administration needs to move beyond words and take action now to reverse a trend that threatens our prospects for future economic growth," he said.

The annual deficit was up from $716.7-billion dollars in 2005, registering the fifth consecutive record-breaking year. But the rise was only 6.5 percent, an improvement over the double-digit gains of the four previous years.

Exports rose 12.8 percent last year to $1.438-trillion while imports grew a slower 10.5 percent to $2.201-trillion.

One of the few bright spots in last year's trade picture was services, which registered their highest surplus since 2000 at $72.5-billion.

The US deficit with China exploded to a new high of $232.5-billion in 2006, up from $201.5-billion the year before.

That accentuated protests as the US administration grapples to persuade China to move on trade disputes such as its currency exchange rate and market access for American goods.

Auggie Tantillo, executive director of the American Manufacturing Trade Action Coalition, said "US trade policy is broken".

"The deficit will only worsen and the offshoring of key US industrial sectors will only accelerate unless Congress steps in and makes major changes," he said.

Treasury Secretary Henry Paulson, who has been leading US economic dialogue with Beijing, said the large US trade imbalance with China would remain until "structural issues" including the currency rate are addressed.

"The rest of the world is only going to be patient for so long," he added.

The annual US deficit with Japan also hit a new high at $88.4-billion, which in turn was likely to intensify criticism among US lawmakers about the yen's weakness against the dollar.

But against the European Union, the US deficit fell over a year that saw the euro strengthen sharply against the dollar. The deficit with Canada also shrank.

The data came a day after top US leaders and a new coalition of business groups warned that the country will lose prosperity and prestige if Congress fails to renew the government's "fast-track" authority to adopt trade deals.

Under Trade Promotion Authority, the administration can submit trade deals for accelerated approval by Congress in a "yes" or "no" vote, without amendment. The legislation is due to expire on 1 July after five years.

But Democrats are stepping up demands for a more muscular approach by Washington against countries like China and Japan.

"Abroad, we have to take tough action to open markets and make sure our trading partners play by the rules," Senate finance committee chairperson Max Baucus said.