Plunge in Exports Puts U.S. Deficit at Record $16.5 Billion

A plunge in U.S. exports helped propel the nation’s trade deficit to a record $16.5 billion in July, the fourth monthly increase in a row, the government reported today.

The Commerce Department said the widening of the gap between exports and imports followed a $15.7-billion deficit in June.

The July shortfall was the largest single-month deficit ever recorded, surpassing a $16.1 billion deficit posted in July, 1986.

For the first seven months of 1987, the trading shortfall has been accumulating at an annual rate of $168.7 billion--above the record $156.2-billion deficit for all of 1986.

U.S. exports, which had been rising through most of 1987, did a turnabout in July and dropped by 5%, to $21 billion. Manufactured goods accounted for much of this drop, falling from $14.5 billion in June to $13.8 billion in July.

Petroleum Imports Up

Imports, meanwhile, rose 2% to $37.5 billion in July. Most of this increase was due to higher petroleum imports--up to $4.4 billion from $3.7 billion in June.

U.S. Trade Representative Clayton Yeutter called the trade report “a disappointment. We have achieved many . . . successes in trade negotiations and we would naturally like to see them reflected in the trade statistics.”

Yeutter, however, added: “The U.S. economy would not be able to absorb such a high level of imports if it were not expanding at a healthy pace.”

In another report today, the Labor Department said that wholesale prices showed no change from June to July, the first time the producer price index has been flat in nine months. Lower food costs and early end-of-the-model-year auto discounts helped offset slightly higher energy prices.

No Turnaround Yet

Today’s merchandise trade report was viewed by economists as further evidence that the long-awaited turnaround in trade accounts has yet to materialize--despite a U.S. dollar that is nearly 50% weaker against other key currencies than it was two years ago. A weaker dollar should make imported goods more expensive and U.S. products more competitive abroad.

Initially, a fall in the value of a currency can worsen a trade deficit through higher import prices. But, after a while, the higher prices are supposed to coax consumers away from the foreign goods and to less expensive domestic alternatives.

Analysts had expected to see this latter effect by now.

Trade Fight Harder

The new report was expected to make it even harder for the Reagan Administration to battle tough trade legislation, before a House-Senate conference committee, that the Administration considers protectionist.

“By the end of the year, we will have become a debtor nation to the tune of $400 billion, and that ain’t chicken feed,” Senate Majority Leader Robert C. Byrd (D-W.Va.) said.

He said the Administration has had six years of “failed trade policies” and that Congress would push ahead with its trade legislation.

The closely watched deficit with Japan fell in July, to $5.1 billion from $5.4 billion in June.

Europe Deficit Worsens

But the deficit with most of this nation’s other major trading partners worsened. The deficit with Western Europe rose to $3.9 billion in July from $2.9 billion in June. The deficit with Canada increased to $645 million in July from $531 million in the previous month.

The trade shortfall with nations that make up the Organization of Petroleum Exporting Countries rose in July to $1.7 billion from $1.4 billion in June.

Despite claims earlier this year by the Reagan Administration that the trade deficit had bottomed out, the gap has widened in every month from April to July.