Asian Slump Shows Up in Trade Tally
Reflecting the growing impact of the Asian economic slump, the U.S. foreign trade deficit widened again in February to its highest level since late 1987, the government reported Friday.
The United States imported $12.1 billion more in goods and services than it exported during the month, the Commerce Department said, up $500 million from a revised $11.6-billion gap in January.
The February deficit was somewhat larger than analysts had expected, prompting economists to speculate that the impact of the Asian economic slump on the United States may prove to be somewhat greater than they had forecast. But they said that they still expected it to be fairly mild.
At the same time, however, economists were struck by the fact that Asian countries did not appear to be trying to export their way out of recession by flooding the U.S. market with their products.
Although the U.S. trade deficit with Japan soared in February, the deficit with other countries hit hard by the Asian crisis actually shrank as exporters in the region continued to experience difficulty obtaining the financing needed to step up shipments.
The deficit with South Korea plunged by 31.1%, for example, while that with Indonesia shrank by 8.2%.
Analysts attributed those improvements in large measure to normal seasonal patterns and said they might not continue much longer.
If anything, the February figures showed that the biggest impact of the Asian crisis so far has been to choke off demand in Asia for U.S.-made products such as capital goods, which have become more expensive there as those countries’ currencies have lost value against the dollar.
Japan bought fewer American goods and services than in any month in three years and the U.S. trade gap with Japan jumped to $5.3 billion, up from $4.4 billion the previous month.
U.S. officials have been pressuring Japan to stimulate its domestic economy, but privately they are pessimistic. Although the Japanese government proposed a $75-billion economic stimulus package last week, it still has not disclosed details.
Many analysts believe that the soaring trade deficit with Japan could prove the administration’s biggest problem in warding off protectionism in Congress.
“Clearly we’re heading for trouble there,” said Lawrence Chimerine, an analyst at the nonpartisan Economic Strategy Institute.
Meanwhile, the Federal Reserve Board issued a report showing that the U.S. manufacturing sector continued to weaken in March, partly as a result of the collapse in orders from Asia.
Although industrial production rose 0.2% in March after two months of declines of the same magnitude, the gain came primarily from a sharp increase in the output of utilities. Manufacturing production again slowed sharply.
The increase in the trade deficit for February came despite a sharp 16.2% drop in the value of petroleum imports, reflecting the decline in oil prices over the last few months. The average cost of a barrel of crude oil dipped to $13.11 in February, the lowest in almost four years.
The trade deficit reflected a decline in exports that was only partly offset by a dip in imports.
Overall, U.S. exports fell by $600 million, or 0.8%, in February to $77 billion, while imports dropped only $100 million, or 0.2%, to $89.1 billion.
Analysts said the trade situation appears almost certain to keep deteriorating for the foreseeable future. Most forecasters expect the U.S. trade deficit to grow from $114 billion last year to about $165 billion this year, a nine-year high.
Economists still insist that the continued deterioration in the trade deficit would be good for America in the short run, because it would act to slow the U.S. economy’s growth and help ease inflationary pressures that might have forced the Federal Reserve Board to raise interest rates.
Most analysts believe that the Asian economic slump will shave 0.75 and 1.5 percentage points from overall U.S. economic growth in 1998, leaving it in the 2.5% to 3% range that policymakers have said would be ideal.
Although February’s trade deficit was larger than expected, analysts said they still do not believe the impact of the Asian slump will be severe.
If it is, it eventually could weaken the value of the dollar and heighten inflationary pressures by making imports more expensive for Americans.
* A BRIGHT SPOT: The U.S. trade gap with Mexico took a welcome downward turn. A1
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U.S. Trade Deficit
The overall gap continues to reflect a deficit in the trade of goods and a surplus in services.
In billions
Feb.: -$12.11
Source: Commerce Department
