Vast Implications : U.S. Passion for Imported Goods May Be Waning
After years of buying more and more from overseas, Americans appear to be losing some of their ardor for imported products, a shift with far-reaching implications for U.S. industry if it endures, analysts said Tuesday.
“What we’re seeing is a flattening out of import growth. There’s no question about that,” Kathleen B. Cooper, chief economist at Security Pacific National Bank in Los Angeles, said after the Commerce Department released its trade deficit report for April. “It’s the one trend that’s going to get us out of this trade deficit.”
For months, such import-battered American industries as steel and automobiles have been moving to recapture their shares of the U.S. market, aided by the weaker dollar, which has forced up the prices of their foreign competitors’ products. While economists cautioned Tuesday against interpreting too much from a single month’s trade report, they were surprised by the across-the-board drop in imports it showed.
Statistics Gyrate
For example, Americans bought $1.2 billion less of foreign-made business equipment and supplies in April than they did in March, and $900 million less of imported automobiles and other consumer goods. In total, imports fell by $2.5 billion, or 6.4%, from their March levels, the largest percentage about-face in imports since October, 1985, and a level that was down from last June.
At the same time, some analysts warned that it was too early to declare the import wave a thing of the past. The trade statistics tend to gyrate considerably from month to month, and some experts await stronger proof that Americans are ready to abandon their import binge, a trend that began in the early 1980s and seriously injured a whole range of U.S. industries from machine tools to consumer electronics.
“I don’t really expect to see a sharp decline in imports,” said John S. Hekman, senior economist with Claremont Economics Institute, a private consulting firm in Claremont. He noted, for example, that business executives have indicated plans for unusually major equipment investments this year, many of which are likely to be supplied from overseas.
Nonetheless, some economists say, a fundamental shift is starting to become apparent as Americans increasingly look beyond imported goods and opt for the home-grown variety.
Consider steel, a long-embattled symbol of America’s industrial muscle. The industry gradually has been regaining its share of the U.S. market since reaching an all-time low in 1984. Imports that year took 26.4% of the U.S. market. Since then, however, their share steadily has declined to the current level of 20.4%, according to the American Iron and Steel Institute.
Dollar’s Decline Cited
Moreover, there are early signs that imported steel parts--used in machines and other finished products sold in the country--also are starting to lose out to their U.S. competition. “As U.S. total imports decline, the steel component of those imports has to decline as well,” said Sheldon Wesson, a spokesman for the Washington-based trade organization.
The key reason for the shift, said Wesson, is the three-year decline in the value of the dollar, which has pushed up the prices of many imported goods, particularly those from Japan and Western Europe.
U.S.-made products are starting to supplant imports in other areas as well. So far this year, for example, domestic auto makers have been increasing their share of the U.S. auto market, a pronounced reversal of the trend of the last several years.
As with steel, the weaker dollar is seen as a key reason for the shift. “As the dollar has fallen, we have definitely seen domestically produced cars capturing a greater share of the U.S. auto market,” said Cynthia Certo, an analyst with Integrated Automotive Resources, an automotive consulting firm in Wayne, Pa.
After watching their share of the lucrative U.S. market decline from 76.5% in 1984 to 69.3% last year, the domestic auto makers have enjoyed a sharp rise to 72.4% so far this year, she said.
Why? In large part, because Japanese and European car makers have hiked prices several times, in some cases, during the 1988 model year alone, she said, adding a total of 5% to 7% since the cars were introduced. By contrast, U.S. auto manufacturers have resisted price increases and instead countered their foreign competitors with aggressive incentive programs.
Consumer Spending Slows
And while the emergence of Honda, Mazda and Toyota as domestic manufacturers clouds the picture somewhat, “The traditional domestics have been increasing,” Certo said. “You can’t deny it.”
Economists said that the slowing down of imports may represent not just U.S. competitiveness but also a sluggishness in consumer spending, which has been reflected in other recent economic indicators. “The current cut-down in imports is part of that,” said Colin Lawrence, senior international economist with the Drexel Burnham Lambert investment banking firm in New York.
Others, meanwhile, worried that a continuing shift from imports to U.S. products would excessively burden American factories, many of which already are running at unusually high levels in order to meet export demand--thereby adding to inflationary pressures. “If we’re getting a shift from foreign sources to domestic sources at a time when exports are growing, one has to worry about the capacity available to meet all the demand,” said Robert H. Chandross, chief North American economist for Lloyds Bank in New York.
But mindful of the not-too-distant past when American business was far less competitive than it is today, Security Pacific’s Cooper observed: “I think that’s a problem that many industries would be happy to deal with.”
