Trade Deficit Swells to Record $11.37 Billion : Economy: April figures provide fresh fuel for negotiators pushing for Japan to open markets. Gap partly reflects leap in imports.
America’s trade deficit climbed to a record high of $11.37 billion in April, raising concerns about the ability of U.S. exporters to boost a weak U.S. economy and giving new ammunition to U.S. negotiators embroiled in a contentious trade dispute with Japan.
U.S. Trade Representative Mickey Kantor told reporters that the trade deficit figures, released Wednesday by the Commerce Department, are evidence that the U.S. government must stand firm in its dispute over U.S. access to Japan’s automobile markets.
“It is critical that we have a meaningful and concrete solution,” Kantor told reporters as negotiators prepared to go back to the bargaining table today in Geneva. “Japan is the second-largest economy in the world. They have a responsibility to open their markets.”
The Commerce Department report shows that the U.S. deficit in goods and services hit an all-time high in April, up 16.2% from a revised March deficit of $9.79 billion. The deterioration reflects a $738-million rise in imports, which set a record, and an $882-million drop in exports.
Despite a slight (4.3%) narrowing in the trade deficit with Japan to $5.9 billion, auto imports from that country were up about $200 million in April. In an ironic twist, that surge in imports was attributed to Japanese auto makers bolstering inventories in the United States in anticipation of the proposed U.S. sanctions on Japanese luxury cars.
April’s trade gap was the largest since the U.S. government began tracking goods and services on a monthly basis in 1992. It was likely to push overall economic growth, as measured by the gross domestic product, close to zero for the current spring quarter, economists said.
Economists blamed a sluggish global economy, particularly in recession-weary Japan and some European countries, and the Mexican peso crisis for April’s reduction in U.S. overseas sales. But they were caught off guard by the increase in imports of goods and services, given the four-month slowdown in U.S. manufacturing output and the size of existing inventories.
The trade deficit “continues to be the nation’s Achilles’ heel, and in April, it got a bit more painful rather than easing somewhat as we all thought,” said Robert Dederick, an economic consultant with Northern Trust Co. in Chicago.
He said it is too early to know whether those figures represent an anomaly or an “insatiable appetite for imported goods,” which would spell trouble for the United States as it tries to narrow its trade imbalance with the world.
Dederick is confident that the trend can be reversed, given the strength of U.S. exporters and the weakness of the dollar against the yen and the mark.
“In the meantime, this remains a drag on our economy,” he said.
Others were not so optimistic. Tomoko Iwakawa, a vice president at Union Bank in Los Angeles, expressed amazement at the decline in U.S. exports. While Japan’s consumers may not be in a position to purchase many U.S. goods given the weak economy, there are healthy markets in other parts of Asia and Europe.
But she said U.S. manufacturers accustomed to selling in the United States have historically been slow to take advantage of currency shifts.
“They don’t really think of changing their medium-term business plans just because of the exchange rates, whereas the Japanese would and the Europeans would,” she said.
In addition to the monthly report, the government released the first-quarter report on the broadest measure of trade, the current account. For the January-March period, this deficit totaled $40.5 billion, the sixth-worst showing on record, though down from the all-time high of $43.3 billion set in the last three months of 1994.
The current account measures trade in goods and services like the monthly report, and also tracks investment flows and foreign aid.
Associated Press and Reuters contributed to this report.
Soaring Trade Gap
Overall U.S. deficit in goods and services, in billions of dollars:
(see newspaper for chart)
1995: -$11.37
Source: Commerce Department
* POLITICAL PRESSURES
Trade compromise appears difficult. A1
