1996 U.S. Trade Deficit Hits 8-Year High of $114 Billion

WASHINGTON — Fueled by record imports in December, the U.S. trade deficit rose to $114.23 billion in 1996, the worst showing in eight years, as an influx of toys and shoes helped push the deficit with China to an all-time high, the Commerce Department said Wednesday.

In December, the deficit in goods and services widened to a larger-than-expected $10.287 billion, up 30% from November, as the annual shortfall in goods alone posted a record.

The trade gap was one of the few blots on a generally sterling U.S. economic performance combining low unemployment with low inflation, and it shows no sign of going away soon.

The data released Wednesday suggest that imports will outstrip exports by even greater amounts in months to come, analysts said, because the rise in the dollar’s value on world currency markets has made U.S.-made goods more expensive compared with foreign-made products.

“We’re going to be looking at another year or two of pretty horrendous trade deficits,” said Nariman Behravesh, chief international economist at DRI/McGraw Hill in Lexington, Mass.

The deficit figure, which includes both goods and services, includes the biggest-ever gap for goods--$187.6 billion. But that was offset by a record $73.4 billion surplus in services.

America’s imbalance with China swelled by 17% last year to a record $39.5 billion, the highest trade gap the U.S. has ever had with any country other than Japan. Chinese imports to the U.S. were up 13% while exports to China grew by only 1.9%.

Taking note of this disparity, Commerce Secretary William Daley said: “China’s market remains far too closed to our exports. We must make every effort in every forum to continue to pry open the Chinese market.”

But many trade experts believe 1997 will be the year in which the deficit with China becomes larger than the gap with Japan, traditional site of America’s biggest trade problems. They said the death Wednesday of Deng Xiaoping will have little impact on trade frictions between the United States and China.

The U.S. deficit with Japan shrank 19% last year to $47.7 billion, while the deficit with China rose 17% to $39.5 billion.

By other measures, however, the trade gap with China was larger, because the bilateral figures released Wednesday include goods only.

Several economists stressed that the trade imbalance is much less worrisome than it was in the mid-1980s, when many American industries were reeling amid a flood of cheap, high-quality goods made overseas.

For one thing, the trade deficit is considerably smaller relative to the overall economy--about 1.5% of gross domestic product last year, compared with 3.25% in 1987.

* DENG AFTERMATH

Deng Xiaoping’s death is likely to have little effect on China’s economy. A17

* MINIMAL INFLATION

U.S. consumer prices rose 0.1% last month, the Labor Department said. D3

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U.S. Trade Deficit

Monthly change, in billions of dollars:

December 1996: -$10.29

Source: Commerce Department

Tracking the Deficit

Annual U.S. trade deficit, in billions of dollars:

1996: -$114.2

Source: Commerce Department