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Trade Deficit Hits $12.5 Billion, 5-Month High

Associated Press

The U.S. trade deficit widened dramatically to $12.5 billion in November, the largest imbalance in five months, the government said today.

The Commerce Department said the gap between what the United States imports and what it sells overseas was 21.9% higher than the October deficit of $10.3 billion.

Blame for the sharply higher deficit was placed on a big jump in imports, which shot up to $39.7 billion, $1.6 billion above the October level. Exports, which have been booming this year, declined by $639 million to $27.2 billion.

The November deficit was the largest since a $13.2-billion imbalance in June.

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In the past, a sharp worsening of the nation’s trade performance has sent shock waves rippling through financial markets. However, today’s report appeared to have little impact on early trading.

Nevertheless, economists said the big jump in the November deficit showed that the country has a long way to go before its trade difficulties are over.

“We have a serious competitiveness problem in this country,” said Lawrence Chimerine, head of the Wefa Group, an economic consulting firm. “There’s a limit to how much you can improve by cutting costs and driving the dollar lower.”

Commerce Secretary C. William Verity termed the report “disappointing. While our exports remain strong, the robust domestic economy continues to draw in imports at near-record levels and the trade deficit remains too high.”

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Verity said that while the trade deficit was running 20% below the all-time high set in 1987, the improvement has leveled off in recent months.

“All of this means that we have a long way to go,” he said in a statement. “We must continue to improve our efficiency and quality at home and pursue our efforts to reduce trade barriers abroad.”

Even with the November deterioration, the trade deficit for the first 11 months of 1988 was running at an annual rate of $137.3 billion, almost 20% below the all-time-high imbalance of $170.3 billion set in 1987.

This big improvement in trade has been largely responsible for the overall prosperity the country enjoyed last year. But analysts have begun to worry that the trade improvement, which was powered by a surge in export sales, is in danger of stalling out this year.

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If that occurs, it raises the threat that the new Bush Administration will have to deal with a possible recession, or at the very least that the new President will be faced with growing cries to erect new trade barriers to protect American manufacturers.

“This is curtains for any hope that we are going to get the trade deficit under control any time soon,” said Michael Evans, head of a Washington economic forecasting firm.


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