Asian Crisis Effect Still Uncertain
The long-predicted flood of imports from Asia has yet to materialize, but U.S. sales to most of that region have taken a serious hit because of Asia’s economic crisis and the strong dollar, the latest trade data show.
But trade experts say that trying to measure the impact of the Asian financial crisis on an increasingly globally complex U.S. economy is like trying to pinpoint El Nino. Plenty of anecdotal evidence exists that Asia’s woes are rippling across the United States, but proof remains elusive.
So far, the picture has been obscured by seasonal distortions, volatility in the aircraft industry and strong U.S. trade with Canada and Mexico. But economists predict that the trade picture will worsen significantly in the coming months.
An analysis by banker J.P. Morgan & Co. comparing U.S. export figures for the last three months with six months ago showed seasonally adjusted annual sales down 35% to Korea, 9% to Japan and 5% to Southeast Asia. Exports to China and Taiwan, the least affected by the recent currency crisis, remain strong.
But a seemingly inevitable surge in newly cheapened imports from Asia still awaits, partially due to a delay in U.S. firms placing new orders and the problems Asian exporters are having getting money to expand their business, according to economists.
J.P. Morgan predicts the annual growth rate in imports will more than triple from approximately 5% last quarter to 18% this quarter.
“While our minds work in seconds, it actually takes months for these things to happen,” said Robert Mellman, a vice president with J.P. Morgan in New York. “I think in terms of importing, it’s really a second-half-of-the-year phenomenon.”
While an eventual influx would be good news for consumers seeking low-priced apparel and electronics goods, it translates into stepped-up competition for U.S. manufacturers and a potential political headache in the form of a bulging trade deficit.
Mellman expects the trade deficit, estimated at $200 billion for 1997, to soar this year by as much as half, to $300 billion.
There is little question that this fall’s collapse of Asia’s economies is costing U.S. firms business. South Korea, whose currency has lost nearly half its value against the dollar, reported that its imports in January declined 40% from a year earlier, while exports rose 1.5%.
Beef exports to Asia, the U.S.’ largest foreign market, have slipped. Global shipping rates have dropped to an 11-year low, largely due to the slowdown in Asia. And the National Assn. of Purchasing Management says manufacturing slowed measurably in January.
“There’s indirect evidence that we’re seeing the effects [of Asia’s slowdown] in that the new orders have slowed markedly and we don’t really know of any domestic reason why that should have happened,” said Robert Dederick, an economic consultant for the Northern Trust Corp. in Chicago.
But Dederick and others cautioned against overstating the Asia factor since the current crisis has become a convenient scapegoat for nearly everyone’s fiscal woes and reliable figures are still difficult to come by.
In any event, the latest Asian turmoil is accelerating a trade trend that began more than a year ago when the dollar began to strengthen against the yen and Japan’s economy started to slow, according to officials at the Port of Long Beach, the nation’s busiest container port.
For the 12 months ended in September--before Asia’s crisis became full-blown--the port showed a year-to-year drop in exports of 18% to Hong Kong, 3% to Korea and .02% to Japan while imports from Taiwan leaped 56%, China was up 32% and the Philippines was up 48%.
Trading patterns across the Pacific have been affected by factors other than Asia’s fiscal crisis this fall, including an outbreak of the bird flu in Hong Kong, effects of El Nino, transportation tieups stemming from last fall’s U.S. railroad merger, and production backlogs at Boeing Co.
Sales to Canada and Mexico also grew sharply last year, offsetting the slowdown in exports to Asia. But those economies are themselves expected to slow this year due to Asia’s woes.
Canada will be particularly hard-hit because it depends heavily on raw material exports to the Pacific Rim.
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In and Out
The Asia crisis is starting to hurt U.S. exports to the region, but has not yet caused the expected surge in imports because Asian firms must get financing to crank up production. But the decline of U.s. exports to Asia has been offset by rising shipments to other destinations. Percentage change in seasonally adjusted U.S. merchandise exports, by region, compared with six months earlier:
Pacific Rim
Western Europe
Canada/Mexico
Source: Morgan Guaranty Trust Co. Research
