Trade Deficit Highest in Year: $29.75 Billion

The U.S. trade deficit swelled to $29.75 billion in the July-September quarter, the highest imbalance in a year, as the Persian Gulf crisis drove up the cost of foreign oil against a drop in demand for American farm products, the government said today.

The Commerce Department said that the trade gap in the third quarter was a sharp 28.9% higher than the $23.10-billion imbalance in the April-June period. The second-quarter deficit had been the lowest in more than six years.

The turnaround occurred because imports shot up 5% to an all-time high of $125.91 billion while U.S. exports edged down 0.6% to $96.16 billion, reflecting the drop in demand for American farm products.

The July-September imbalance was the largest quarterly deficit since a $29.8-billion deficit in the same period last year. Since that time, the deficit had been on a steadily declining path as a boom in U.S. export sales helped to narrow America’s huge trade deficit and give the economy one of its few bright spots.

However, since Iraq’s Aug. 2 invasion of Kuwait, economists had been forecasting that a higher foreign oil bill would translate into a rising trade deficit, adding one more negative factor to an economy already flirting with a recession.

The higher July-September deficit reflected a $6.1-billion increase in imports. Petroleum imports were up $3.5 billion to $15.7 billion, reflecting a rise in both price and volume.

Non-petroleum imports were up as well, climbing $2.5 billion to $110.2 billion as auto imports from Mexico and Canada rose.

The biggest weakness came in a 6% drop in farm exports.