U.S. Trade Gap Declines Sharply as Imports Drop

America’s foreign trade deficit shrank dramatically in April, the government reported Friday, continuing a visible, though bumpy, improvement over the last few months.

Commerce Department figures showed that imports exceeded exports by only $6.94 billion last month, down from an $8.36-billion deficit in March and even higher levels during the latter part of 1989.

The improvement stemmed from two factors: Imports dropped sharply, reflecting increasing softness in the domestic economy, and U.S. exports continued to boom, responding to a weakened dollar and robust demand abroad.

The April trade figure sent forecasters scurrying back to their computer models. Many now predict that the trade deficit for the year almost certainly will fall below $100 billion for the first time since 1983.

Robert G. Dederick, a former chief economist of the Commerce Department, said he now believes the trade deficit for 1990 will fall to about $95 billion, down from $109 billion in 1989 and a peak of $152.1 billion in 1987.

Internal Bush Administration forecasts predict that the trade deficit will drop to the $87-billion range.

Jerry Jordan, chief economist at First Interstate Bancorp in Los Angeles and a former member of the President’s Council of Economic Advisers, said that the trade improvement ought to give the Federal Reserve more leeway to reduce interest rates.

“The Fed’s got to ease, and this--combined with the recent easing in inflation pressures--ought to give them a little breathing space,” Jordan said. The Fed had been reluctant to lower rates when the trade deficit was high for fear that import buying would surge.

The decline in imports was significant. U.S. purchases of foreign goods fell by 6.2% during April to $39.25 billion, down from $41.86 billion in March.

At least part of the decline stemmed from a lower oil import bill, reflecting a drop in global oil prices, which had soared during the winter cold spell, as well as a reduced volume of petroleum purchases.

The average price of a barrel of oil fell by $1.61 in April to $16.57 after rising sharply the month before. And the volume of oil imports fell to 7.55 million barrels a day in April, down from 8.42 million the previous month.

Meanwhile, sales of imported cars fell again in April as auto sales slumped generally across the country and Japanese manufacturers shifted more of their production to plants inside the United States. Imports of industrial supplies also fell sharply.

At the same time, U.S. exports reached $32.31 billion in April--a 3.5% decline from the previous month’s benchmark, but still at boom levels. The March export total of $33.49 billion had been a record high.

The April export figure was buoyed by aircraft shipments, which rose to $1.66 billion from $1.51 billion in March. Exports of capital goods, computers, foods, telecommunications equipment and other merchandise all declined slightly.

However, analysts said they expected aircraft shipments to remain strong for several months. China, South Korea and Japan recently announced plans to buy about $9 billion worth of U.S.-built airliners.

As usual, the largest deficit the United States recorded with any country was with Japan. That deficit rose to $4 billion in April from $3.6 billion in March. The United States posted a $1.4-billion surplus with Western Europe--double that recorded in March.

Other deficits included $800 million with Taiwan, $600 million with China, $400 million with South Korea, $300 million with Brazil and $100 million with Mexico. Most were the same as or up slightly from the previous month’s levels.

The overall deficit of $8.36 billion in March was revised down from an earlier estimate of $8.45 billion. Such revisions are common after additional import and export data has been received.