Trade Deficit Soars to $13 Billion as Asian Goods Flood U.S. Market
A wave of imports from hard-hit Asian countries flooded the U.S. market in March, sending America’s already-burgeoning foreign trade deficit soaring to its highest level since the late 1980s, the government reported Wednesday.
Commerce Department figures show that imports exceeded exports by a whopping $13.03 billion for the month, up from a revised $12.18 billion for February. Exports increased by 3.3% in March, but imports jumped 3.8%.
Analysts said the larger-than-expected increase in the trade deficit marks a delayed effect from the Asian financial crisis, which has cheapened many Asian currencies and sent beleaguered Asian countries rushing to sell their goods here.
Sung Won Sohn, economist for Norwest Corp. in Minneapolis, said the new figures show that “the Asian typhoon has not gotten lost,” as some optimists have suggested. “The waves of the Asian crisis are hitting our shores.”
Cynthia M. Latta, economist for Standard & Poor’s/DRI in Lexington, Mass., said the impact of the Asian slump had not shown up previously because many Asian firms have been unable to get export financing and could not send their goods overseas in volume. “Now, they are flooding in,” she said.
The widening U.S. trade deficit--now expected to breach $160 billion this year, compared with $113.6 billion in 1997--is likely to pose mounting political problems for the Clinton administration, as Congress demands that the White House take action to keep it in check.
But economists say there is little that the United States can do to stop it. Officials here say the deficit reflects the fact that America’s economy--and its currency--are much stronger than those of America’s trading partners, making it a haven for others’ exports.
The steadily strengthening dollar is another major factor. As the value of the dollar rises, imports become cheaper--and more attractive--to Americans, while U.S. exports become more expensive to foreigners and therefore less competitive.
However, analysts caution that if the deficit continues to widen indefinitely, eventually it is likely to spark a decline in the value of the dollar--a shift that ultimately could force the Federal Reserve Board to raise interest rates again if the trend is not reversed.
Top Fed policymakers left short-term interest rates unchanged on Tuesday partly in hopes that the impact of the Asian economic crisis might help slow the pace of the economy in the United States. Fed officials fear that too-rapid growth here might revive inflation pressures.
Analysts predicted that the fast-deteriorating trade situation could shave between 1 and 1.5 percentage points from the nation’s economic growth rate this year, bringing it down to the 2.5% pace that most analysts think is optimal--from a 4.2% pace last quarter.
The widening of the trade deficit in March came despite a rebound in U.S. exports, which had fallen during February in part because of cutbacks by customers in Asia. But part of the rebound reflected a pickup in aircraft orders, which are volatile and skew the figures.
The U.S. trade gap with South Korea surged to $659 million from $590 million in February, while that with Japan rose to $5.76 billion from $5.29 billion before. The deficit with China jumped to $3.8 billion from $3.5 billion in February.
At the same time, the trade deficit with Mexico more than doubled during March, rising to $1.35 billion from $583 million the previous month, as Mexico’s export boom continued to gain steam.
The U.S. trade deficit with Canada narrowed a bit, to $1.09 billion in March from $1.4 billion the previous month. The figures cover trade in both goods and services.
Wednesday’s figures showed no major change in the composition of U.S. exports and imports from Asia in the face of the economic slump there. Only the volume of trade increased--with America buying substantially more from overseas, while U.S. exports are falling off.
The major categories of goods that the U.S. buys from Asian economies include electronic equipment, automobiles, textiles, shoes and some specialized machinery. In return, Asians buy American agricultural exports, aircraft and capital goods.
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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:
March: -$13.03 billion
Source: Commerce Department
