U.S. Exports Dropped in 1998; Trade Deficit Highest in History
The economic crisis that has pushed one-third of the globe into recession caused U.S. exports to drop for the first time in 13 years in 1998 and sent the nation’s trade deficit to its highest level in history, the government said Friday.
A separate report confirmed that inflation remained in check in January, as consumer prices rose a barely perceptible 0.1%, less than expected. Higher costs for oranges, airline tickets and cigarettes were offset by price declines elsewhere, including the biggest one-month drop in clothing costs in a decade, the Labor Department report showed.
The Commerce Department said Friday that the imbalance between what America imports and what it sells abroad soared to $168.6 billion last year, 53% above the 1997 level and topping the old record of $153.3 billion set in 1987.
Though the year managed to end on a slightly positive note with a lower-than-expected December deficit of $13.8 billion, economists warned that the trade gap will widen further this year.
“There is no way that you can conclude the worst is over,” said Lawrence Chimerine, chief economist at the Economic Strategy Institute, a Washington think tank. “The deficit was up $58 billion last year, and we could easily see another $40 billion to $50 billion increase this year.”
The latest worry is Latin America, which accounts for one-fifth of U.S. export sales. Brazil, the region’s largest economy, was forced to devalue its currency last month, and the fear is that a recession there will quickly spread to other nations in the region.
American exports fell by 0.7% in 1998, the first annual decline since 1985, as sales of everything from soybeans to autos slumped. The global slowdown translated into the worst year for farmers in a decade and contributed to a loss of 234,000 manufacturing jobs last year.
Despite those setbacks, the overall U.S. economy continued to power ahead as strong domestic demand offset the loss of overseas sales.
In fact, the lower-than-expected trade gap in December probably means that the government will revise upward its estimate of overall economic growth from October through December from a sizzling 5.6% to an even faster 6% pace, many analysts said.
But growth is expected to slow markedly this year, reflecting less consumer demand and continuing troubles in the trade sector. Most economists aren’t expecting a recession unless renewed global turbulence causes a big tumble in American markets that makes consumers fearful.
The Clinton administration, worried that the record trade deficits will cause a backlash against its free-trade policies, has been stressing with repeated urgency the need for Japan, the world’s second-largest economy, to pull out of its worst recession in 50 years and for Europe to do more to buy imports from crisis countries.
“Japan and Europe must move forward to . . . help promote economic stability and growth in emerging economies,” Commerce Secretary Bill Daley said in commenting on the latest trade figures. Treasury Secretary Robert E. Rubin was expected to make the same point during meetings of major industrial countries in Bonn, Germany, on Saturday.
The politically sensitive trade deficits with both Japan and China widened last year. The imbalance with China rose 15% to a record $56.9 billion, the highest ever for any country other than Japan.
America’s deficit with Japan rose 14% to $64.1 billion, the second-worst showing on record, surpassed only by a $65.7-billion deficit with Japan in 1994.
The U.S. deficit with all Pacific Rim countries, the region hardest hit by the global crisis, rose 33% in 1998 to $160.4 billion.
These increases are coming as Clinton, who took office vowing to open markets for U.S. industries, is under mounting pressure to erect protectionist barriers. The steel industry has filed a number of cases petitioning the government to impose punitive tariffs, and other industries, from machine tools to textiles, are considering filing their own cases.
For 1998, total exports dropped 0.7% to $931.3 billion. Before last year, big annual gains in exports supplied fully one-third of total economic growth for a decade.
Imports last year jumped 5% to a record $1.10 trillion. The increase would have been even larger, except that falling world energy demand pushed down the price of imported oil to a 24-year-low of $11.52 per barrel.
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Trade Deficit
Annual U.S. trade deficit in goods and services, in billions:
1998: -$168.6 billion
Source: Commerce Department
