Flood of Imports Pushes Trade Deficit to Record $123.3 Billion : Effects of Strong Dollar Outweigh Increase in Exports

The United States suffered a record foreign trade deficit of $123.3 billion last year as a flood of imports swamped a modest increase in exports, the government reported today.

The Commerce Department said the new deficit total came close to doubling the old record of $69.4 billion set in 1983 and was almost three times higher than the 1982 figure of $42.7 billion.

Private and government economists expect further deterioration in coming months.

Commerce Secretary Malcolm Baldrige, commenting on today’s report, predicted “another record trade deficit for 1985” as “resumed growth in the economy and the continuing impact of the dollar’s rise during 1984 indicate higher imports in the months to come.”

Analysts have blamed the strong dollar for the imbalance. Since 1980, the value of the dollar has risen by 41% against other major currencies, making foreign goods cheaper in this country and U.S. wares more expensive and thus more difficult to sell overseas.

The skyrocketing deficits have led to growing pressure for further import restraints among industries suffering the most from foreign competition, such as steel, autos and textiles. By one estimate, the trade deficit has cost 2.5 million U.S. jobs.

Imports last year soared 26.4% above the 1983 level while exports were rising just 8.7%.

For the year, the surge in imports was led by huge increases in shipments of iron and steel products, new cars, electrical machinery, and telephones and other communications equipment.

Iron and steel imports jumped 61.1% last year while foreign car shipments were up 27.2%. Imports of electrical machinery rose by 46.5% and shipments of telecommunications equipment were up 41.3%.

The country’s foreign oil bill climbed to $59.2 billion in 1984, a 7% increase over 1983. But this is still below the 1982 total of $62.7 billion, primarily because of price weakness.

The trade imbalance has had some positive effects. The flood of cheaper foreign goods has kept pressure on domestic producers to hold the line on prices. This pressure has helped to dampen the overall inflation rate, which last year was a moderate 4% at the consumer level.

However, the surge in imports has cost American jobs as imports have captured about one-fourth of the U.S. steel market and 22% of car sales with textile, shoe and machine tool industries also hard hit.