February Trade Deficit Soars to $15.1 Billion
The nation’s trade woes continued in February as merchandise imports outpaced exports by $15.1 billion--the third-highest monthly trade deficit ever and a level well beyond market expectations, the Commerce Department reported Tuesday.
But the department, disclosing what it called an improved system for estimating the import-export data, sharply revised downward January’s deficit figure from an earlier reported $14.8 billion to $12.3 billion.
1986 Estimate Cut
In addition, for all of 1986, it cut $3.5 billion from the trade deficit to a new estimate of $166.3 billion, though it is still the highest ever.
Some economists believe that the January and February figures are a sign of a downward trend in the trade deficit, an interpretation that was bolstered slightly by the fact that U.S. exports jumped $2.3 billion to $18.7 billion for the month, the best gross export record in four months.
Moreover, economists pointed out that the recent sharp decline in the dollar makes the picture look worse than it really is by driving up the nominal value of imports and shrinking the nominal value of exports.
Cold Comfort
However, the reported $15.1-billion February deficit--the worst since last November’s $15.4-billion gap and last July’s record $16.1-billion deficit--was cold comfort at best. Market analysts generally had expected the deficit to be between $13 billion and $14 billion.
“It’s two years since the dollar peaked, and we would have hoped to see more improvement by this time, but there is almost nothing. The value of imports keeps going up, while foreign demand for our goods has not responded enough to offset that,” said Sara Johnson of Data Resources Inc., an economic forecasting firm in Lexington, Mass.
“The worsening in February was sizable; it showed up with most trading partners and in most categories of goods,” added Allen Sinai of Shearson Lehman Bros. of New York.
The bilateral deficit with Japan expanded from $4.4 billion to $5.1 billion; with Western Europe from $1.8 billion to $1.9 billion; with Canada from $1.6 billion to $1.9 billion; with Taiwan from $1.4 billion to $1.5 billion, and with Mexico from $200 million to $800 million.
The Democratic leadership in Congress, which has been pushing protectionist trade legislation as an early political issue for 1988, quickly seized on the February estimate. Senate Majority Leader Robert C. Byrd (D-W.Va.) said in a statement: “This proves once again that Congress needs to take constructive action on the trade problem . . . to defend our industrial base.”
But the U.S. special trade representative, Clayton K. Yeutter, told reporters that proposed legislation mandating sanctions against nations with large trade surpluses with the United States would be self-defeating. He argued that such action would violate international trading rules and justify retaliation.
‘Corrective Forces’
In Santa Barbara, White House spokesman Marlin Fitzwater said: “It’s never good news when the trade deficit goes up, but nevertheless we think there are corrective forces out there that will make this no cause for real alarm. Over the long term, we’re still in a healthy economic situation.”
Commerce Secretary Malcolm Baldrige noted that the reported $18.7 billion in U.S. exports during February was 5.6% above the monthly average exports of $17.7 billion for January through March, 1986, and 3.3% above the monthly export average for the whole year.
“Improvement in our real trade balance since February, 1986, although slower than we had projected, reflects the dollar’s sharp decline,” Baldrige said in a statement. “The inflationary impact of higher import prices has not been large, so overall economic growth will pick up as the trade deficit continues to shrink.”
Underlying Improvement
Some economists found some merit in that view and were encouraged by what they called an underlying trade improvement so far this year over previous months.
“Taking January and February together, it’s not a bad figure. It’s actually quite good for the economy,” said David Levine, chief economist for Sanford C. Bernstein & Co., a New York investment firm.
Other analysts, including Martin Mauro of Merrill Lynch in New York and Michael Penzer, an economist with BankAmerica in San Francisco, offered similar interpretations.
Compared to last summer, when the monthly trade deficit averaged $14.9 billion, and the final quarter of 1986, when the average deficit improved to $14.3 billion, the deficit for the first two months of 1987 is running at an average $13.7 billion, Levine said.
