Trade Deficit for ’85 Soars to $148 Billion : News of Record Gap for Year Softened by Solid Gain in Index of Leading Indicators
The nation’s trade deficit soared to a record $148.5 billion for all of 1985 and ended the year on an especially sour note as imports flooded into the United States last month at twice the level of exports, the Commerce Department reported Thursday.
The yearly deficit represented a staggering leap of 20.4% over 1984, when a then-record deficit of $123.3 billion spurred a still continuing outpouring of protectionism in Congress that seems certain to be provoked further by Thursday’s report.
Analysts indicated that they found the collapse of the trade balance in December--to the largest monthly deficit ever, $17.4 billion--particularly disappointing. The previous monthly record, $15.5 billion, was set last September.
The sobering news was eased somewhat by a separate Commerce Department report that the index of leading indicators, the government’s main barometer of future economic performance, rose a solid 0.9% in December and a respectable 5.8% for all of 1985. The gain last month was equal to the largest such rise since January, 1985.
At the White House, spokesman Larry Speakes stressed the positive, hailing the leading indicators report as “a clear signal of the gathering momentum in economic growth.”
Third of Deficit With Japan
But, he conceded, the trade deficit was one of the “few problems we do see.” And he expressed hope that a continued decline in the value of the dollar, which has fallen 24% since its peak last March, would lead to “a reduction in the trade deficit no later than the second half of the year.”
About a third of the total deficit, $49.7 billion, came from the surge of imports from Japan, up from $37 billion in 1984.
In Tokyo, the Japan Automobile Manufacturers Assn. announced Thursday that the value of automotive exports to the United States grew by 21.4% in 1985, increasing by $4 billion over 1984’s figure. It also said that exports to the United States and Canada combined totaled 3.38 million units for the year, an increase of 20.9%.
The U.S. trade deficit with Western Europe, meanwhile, stood at $27.4 billion; Canada, $22.2 billion; Taiwan, $13.1 billion, and the Organization of Petroleum Exporting Countries, $11.6 billion.
Total U.S. imports in 1985 were valued at $361.6 billion, compared to $213.1 billion in exports. In December alone, imports skyrocketed 15.4% to $34.4 billion while exports fell 4.5% to $17 billion--resulting in an import-export ratio of two to one for the first time.
In response to the trade deficit report, a group of congressional Democrats announced the introduction of legislation Thursday to restrict imports from foreign countries if U.S. exports to those nations fall below target levels that would be set by the U.S. trade representative.
Sen. Lawton Chiles (D-Fla.), sponsor of the Senate bill, tied it explicitly to partisan strategies, disputing the view that the Reagan Administration’s recently activated trade policies are enough to prevent Congress from taking action on its own.
“We will see some sort of major trade legislation come out of Congress this year, I think,” Chiles said. “We are not going to want to go into an election without it.”
Lower Value of Dollar
Added Rep. Daniel A. Mica (D-Fla.), who offered identical legislation in the House: “We are witnessing the death of a nation as a salesman. . . . We can ignore the problem and hope it goes away, or we can fight it by forcing open overseas markets and fostering domestic policies that put U.S. exporters on an equal footing with their foreign competitors.”
And, although several economists said the positive impact from the lower value of the dollar remains to be felt, Allen Sinai of Shearson Lehman Bros. declared that “it should be clear in a common-sense way that we are not yet competitive with the rest of the world--particularly in the goods that Americans want to buy.”
Robert Gough, a senior vice president of the forecasting firm Data Resources, noted that Japan and other nations have seized a growing market share in high-technology fields in which the United States used to dominate. Among these fields, he said, are aerospace, medical technology, pharmaceuticals and computers.
But Gough said he found the strong signals from the report on leading indicators “more encouraging than expected.” Much of last month’s increase was based on two components, building permits and stock prices, while the most important negative factor appeared to be a significant decline in orders for consumer goods.
