U.S. Foreign Trade Gap Widens
The nation’s trade deficit widened slightly in December, the government reported Thursday, but analysts said the figures reflected only a scant impact from the Asian financial crisis, which is expected to hit the United States in force in the spring.
Commerce Department figures showed that the U.S. imported $10.8 billion more than it exported in goods and services in December--up from a revised $8.7-billion trade deficit the previous month, and the largest monthly trade gap since September.
Analysts were divided about how much, if any, of the rise could be traced to the Asian crisis. The increased trade deficit with South Korea, America’s largest trading partner among the hardest-hit Asian economies, accounted for only a fraction of the overall $2.1-billion increase in the U.S. trade gap.
Robert G. Dederick, chief economist for Northern Trust Co. in Chicago, said whether to attribute the increase to the Asian crisis was “in the eyes of the beholder. You can see something if you want to, or you can say there’s nothing really there yet.”
Lawrence Chimerine, an analyst at the Economic Strategy Institute, was even more skeptical, saying, “I don’t think today’s report shows much of Asia.” He predicted more serious signs in reports for January and February.
But more current trade data released Thursday provided a glimpse of things to come. Shipments from Asia to the Port of Long Beach, the nation’s busiest port, jumped 17.3% in January compared with a year earlier, and exports declined 8.3%.
The numbers show “some effect from the Asian crisis,” especially on the export side, said Don Wylie, the port’s director of trade and maritime services. While January is “typically a low export month,” he said, “I’m a little surprised exports fell that low.”
The December trade statistics brought the overall U.S. trade deficit for 1997 to $113.8 billion--up slightly from the 1996 total of $111 billion, but still the largest yearly gap in a decade.
Analysts said the bulk of December’s increase reflected the fact that even before the Asian crisis, the dollar was weakening against the Japanese yen while the U.S. economy was growing more rapidly than those of its major trading partners. That, in turn, made Americans more hungry for foreign goods and services, while foreign markets for U.S. exports slowed.
One striking shift in trade patterns last year was that Mexico replaced Japan as the second-largest market for American exports. In a reflection both of Japan’s stronger yen--which makes foreign products more expensive--and Mexico’s economic recovery, the U.S. exported $71.4 billion in goods to Mexico in 1997, up from $56.8 billion in the previous year.
Government and private analysts agreed that the Asian crisis was likely to have a major effect this year as Asian economies, already in a serious slump, reduce their purchases of U.S. goods and push to sell their products here at cut-rate prices.
Most private economists are predicting that the U.S. trade deficit for 1998 will surge to between $150 billion and $165 billion, far larger than the current record of $115.9 billion posted in 1988.
The Clinton administration, wary of the political impact of a growing trade deficit on an already protectionist Congress, took pains to point out that the increase was likely to have only a modest effect on the booming U.S. economy.
U.S. Treasury Secretary Robert E. Rubin said the trade numbers showed some “beginning . . . signs of the effects of problems in Asia,” and he predicted that “those effects are going to increase even if Asia begins to stabilize in coming months.”
Rubin will travel to London today for a meeting of finance ministers and central bankers of the seven major industrialized nations at which the Asian crisis will be on the agenda. The group is expected to offer Asian nations more financing for trade.
Janet L. Yellin, chairwoman of President Clinton’s Council of Economic Advisors, said that despite the likelihood of a larger trade deficit, the economy was still expected to grow rapidly in 1998, continuing to create large numbers of jobs each month.
Even so, economists said the higher-than-expected monthly deficits in October, November and December were likely to reduce the growth of the U.S. economy during 1997’s fourth quarter by almost a percentage point from the 4.3% annual rate previously reported.
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Bloomberg News was used in compiling this report.
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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 of dollars:
Dec.: -$10.79
Source: Commerce Department
