U.S. Trade Deficit Hits Record High : $36.28 Billion in Third Quarter Tops Mark Set in Spring

The deficit in the broadest measure of U.S. foreign trade hit a record $36.28 billion from July through September, the government reported today.

The Commerce Department said the imbalance in the nation’s current account was 5.4% higher than the old record, set in the April-June quarter, of $34.41 billion.

The current account measures not only trade between nations in merchandise, but also covers services, primarily investment earnings and transfer payments, such as foreign aid.

Until five years ago, the country enjoyed a surplus in its current account as earnings on American investments overseas were enough to offset deficits on merchandise trade.

Deficit in 1985

However, the United States suffered a record $117.68-billion current account deficit in 1985 and analysts are predicting that this year’s deficit could top $140 billion. For the first nine months of the year, the deficit already totals $104.73 billion.

Current deficits have pushed the nation in just three years from the status of the world’s largest creditor to the world’s biggest debtor. That means foreigners now own more U.S. investments than Americans hold in foreign investments.

The United States was in hock to the rest of the world by a total of $107.44 billion at the end of 1985. The new figures on the current account suggest that debt is now hovering around $193 billion, far surpassing the $103.7 billion debt of Brazil, the previous leading debtor nation.

Cars From Asia

For the July-September quarter, the deficit on trade in merchandise increased by $2 billion over the previous quarter to $37.7 billion. Non-petroleum imports rose by $2.2 billion, with the increase largely accounted for by an increase in shipments of cars from Japan and Korea.

Exports rose by $200 million to $55.3 billion, with a $300-million rise in agricultural exports offsetting declines in other areas.

Adding to the $37.7-billion merchandise trade deficit was $4.18 billion in unilateral transfer payments, including foreign aid, an increase of $100 million from the spring quarter.

These figures were offset somewhat by a $5.6-billion surplus in the service category, an increase of $200 million from the spring quarter. While foreigners now own more in American investments than Americans own overseas, the United States still enjoys a slight surplus in earnings because the rate of return on many older American investments is higher than foreigners are receiving here.