Drop in Oil Prices, Dollar Help U.S. Trim Trade Deficit in First Quarter

Thanks in large measure to lower oil prices and the falling value of the dollar, the nation’s merchandise trade deficit fell by $767 million during the first three months of 1986, the Commerce Department reported Wednesday.

The deficit for the period was $36.6 billion, down from the record-breaking level of $37.4 billion in the final quarter of last year.

“At this point, people really are beginning to see positive results from the lower dollar,” said Brian Wynne, manager for international trade at the American Electronics Assn.

The dollar’s decline in value--about 30% in relation to a basket of other currencies in the last 15 months--makes U.S. goods cheaper for foreign buyers while raising the costs of imports to American consumers. Wynne said that American business executives who did not bother to sell overseas when the dollar was high are now encouraged by marketing prospects abroad.

But, because the complete process of placing orders, producing merchandise and delivering it may take months, the trade deficit will not show any dramatic effects for months, economists believe.

“It’s easier to lose market share than regain it,” said Lawrence Fox, international affairs vice president for the National Assn. of Manufacturers.

U.S. spending for imported oil plunged to $10 billion, a savings of $4.1 billion from the previous quarter. Both the price of oil and the amount imported dropped sharply during the first three months of the year.

Total imports held steady at $90.1 billion during the first quarter. Exports rose to $53.6 billion, up from $52.7 billion during the fourth quarter of last year, with the biggest increases registered in sales to Europe and Japan. The newly revised figures measure trade in goods but not services such as banking, or tourism.

“I don’t see any prospect” for a major improvement in the deficit before the November congressional elections, Fox said.

The Democratic majority in the House, sensing a powerful political issue, has approved a trade bill that would limit the President’s authority to resist protectionist measures and would impose restrictions on imports from countries enjoying a big trade surplus with the United States.

White House officials have said that President Reagan would veto the House version of the bill if it passes the Senate and reaches his desk.

However, Administration officials hope the Senate will adopt a milder version of the legislation or fail to act before the elections.

As the dollar has fallen in relation to foreign currencies, the average price of cars from Japan, for example, rose 7% during the first quarter following a 5% increase in the final three months of last year, the Commerce Department said.

The total 12% rise in car prices was far short of the approximately 42% climb in the value of the yen in relation to the dollar since last September because Japanese marketers, eager to keep a strong position in the lucrative U.S. auto market, have been willing to accept temporarily lower profits here.

The nation’s trade deficit with Japan climbed to $13.3 billion during the quarter, a rise of $900 million.

The deficit with Western Europe rose to $6.6 billion, an increase of $600 million.