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UPDATE 1-Obama signs bill to ease U.S. manufacturers' costs

* Legislation is part of “Make it in America” agenda

* Obama says it would help manufacturers sell abroad

* Industry group applauds it, urges efforts on free trade

(Adds statement from equipment manufacturers)

By Caren Bohan

WASHINGTON, Aug 11 (Reuters) - President Barack Obama signed a bill on Wednesday aimed at easing costs for U.S. manufacturers by reducing tariffs on materials used to make the products they sell.

The bill is part of a “Make it in America” agenda that Obama’s Democrats are pushing ahead of the Nov. 2 congressional elections. Supporters say the initiatives will reduce the huge U.S. trade deficit with China and other countries by bolstering American manufacturing firms.

“Our economy has fallen into the habit of buying from overseas and not selling the way it needs to, but it is vitally important that we reverse that trend,” Obama told members of the business community who gathered at the White House for the bill signing.

Obama said the bill would make it “cheaper and easier for American manufacturers and American workers to do what they do best: build great products and sell them around the world.”

The manufacturing legislation passed overwhelmingly in the U.S. Congress last month and has the support of many business groups.

The National Association of Manufacturers has said it would boost U.S. manufacturing output by $4.6 billion and support about 90,000 jobs.

It would reduce or suspend tariffs on a list of raw materials and component parts no longer produced in the United States but used by American companies to make other products.

Some examples include shoe leather used by companies such as New Balance to make running shoes and some types of computer chips used to make computers.

The global financial crisis led to a major slowdown in trade, causing the U.S. trade deficit to shrink to $375 billion in 2009 from $699 billion in 2008.

As economic growth has returned, the trade gap is on the rise again.

A wave of consumer goods imported from China led to a surprising widening of the U.S. trade deficit in June, according to a report from the Commerce Department on Wednesday. The trade gap hit $49.9 billion, the highest since October 2008.

The Association of Equipment Manufacturers welcomed the legislation as a “small step to leveling the playing field for equipment manufacturers that seek to export American-made products.”

But the industry group also urged the U.S. Congress to “take immediate action on substantive manufacturing policies,” such as ratifying free-trade agreements with South Korea, Panama and Columbia. (Editing by Bill Trott and Paul Simao)