The United States suffered a record trade deficit in January. Mexico’s currency crisis cut into exports while demand for foreign toys, televisions and heavy machinery pushed imports higher.
The Commerce Department reported Wednesday that the imbalance in goods and services jumped 68.4 percent to $12.23 billion, up from a December deficit of $7.26 billion.
This represented the highest deficit in goods and services since the government began tracking this data on a monthly basis in 1992. Looking just at merchandise, the deficit of $16.3 billion was the highest in U.S. history, surpassing the old mark of $15.9 billion set in December 1985.
The new report painted a bleak picture of America’s trade fortunes at the beginning of the year. Exports of aircraft, normally a standout performer, sank to a 17-year low while the United States suffered its first ever deficit in big-ticket capital goods.
“No matter how you look at it, January was a disaster,” said Larry Chimerine, chief economist at the Economic Strategy Institute in Washington. “The scary part is that the trade deficit will get worse before it gets better.”
Robert Dederick, economist at Northern Trust Co. in Chicago, predicted that last year’s merchandise deficit, which climbed to a record $166.57 billion, could easily go to $175 billion this year, acting as a further drag on U.S. economic growth.
Many economists predicted that the trade deterioration would put further pressure on the dollar, which in recent weeks has fallen to record lows against the Japanese yen and German mark.
Financial markets, however, took Wednesday’s bad trade report in stride. The dollar edged lower against the yen and stocks posted a gain, with the Dow Jones industrial average rising 10.38 to close at 4,082.99.
The trade report showed how quickly Mexico’s currency crisis, which began on Dec. 20, hit U.S. exports. The U.S. trade balance with Mexico went from a $19 million surplus in December to a deficit of $863 million in January, the biggest imbalance with that country in a decade.
Imports from Mexico jumped by 10.9 percent while U.S. exports fell by 9.8 percent as the steep devaluation of the peso hurt American sales in what has been the country’s third-biggest export market.
The White House insisted that the administration’s strategy of lowering trade barriers to boost U.S. exports, a centerpiece of its foreign policy, will begin to pay off as overseas economies start to grow more rapidly.
Press secretary Mike McCurry said the January deficit made a “persuasive case again that we need to do everything we can to open markets overseas.”
Critics, however, charged that the widening trade gap proved that Clinton has been wrong in staking so much on big trade deals such as the North American Free Trade Agreement with Mexico passed in 1993.
“We said a lot of bad things would happen if NAFTA was approved and people said we were hysterical. Now that these things are coming true, it is time for a course adjustment,” said Lori Wallach, a trade expert with Public Citizen, a Ralph Nader organization.
America’s deficit with Japan was $4.86 billion in January, the highest for any single country, but down 12.5 percent from December. Analysts said part of the decline represented a disruption in shipping at the huge Kobe port following January’s earthquake.
Other big deficits were recorded with China, $2.72 billion, up 34 percent from December, and Canada, America’s biggest trade partner, $1.35 billion.
The 3 percent jump in goods imports to an all-time high of $61.17 billion reflected big gains in a number of areas. They were led by a $542 million rise in consumer imports of such items as toys, televisions and pleasure boats.
Imports of autos and automotive parts were up $397 million while demand for capital goods such as computers and telecommunications equipment surged by $428 million.
The growth in imported capital goods turned what had been a perennial area of surpluses for American manufacturers into a deficit for the first time since the government began tracking this data separately.
The 5.4 percent drop in goods exports was led by a giant $946 million fall in exports of civilian aircraft, which declined to $524 million, the lowest level since February 1978. Analysts cautioned against reading too much into this onemonth decline since shipments of huge jetliners are extremely volatile.
America’s foreign oil bill actually dropped in February to $3.94 billion, a decrease of 2.1 percent from a December total of $4.02 billion. The price per barrel rose to $15.05, up from $14.71, while the volume fell by 4.5 percent.