U.S. Trade Deficit Declines 13.7% Export Of Goods, Services Reaches Record $80 Billion

Even as the trade gap with Japan worsened, America’s overall deficit narrowed sharply in October to $9.7 billion. But serious troubles were seen ahead as the U.S. economy is buffeted by the Asian financial crisis.

The Commerce Department said Thursday the deficit declined by 13.7 percent from a September imbalance of $11.3 billion, one of the biggest in history.

U.S. export of goods and services rose 2.4 percent in October to an all-time high of $80 billion,with sales of American-made cars, farm products and industrial equipment posting big gains.

As exports increased, however, imports also set a record, edging up 0.4 percent in October to $89.7 billion, paced by a rising foreign oil bill.

The Clinton administration pointed to the export strength to show that American companies remain competitive, but private economists worried that financial problems in important Asian countries spell trouble ahead.

South Korea, Indonesia and Thailand have been forced to seek multibillion-dollar bailouts from the International Monetary Fund as one after another Asian nation has been hit by collapsing currencies, falling stock markets and rising unemployment.

The currency declines will make Asian products cheaper for American consumers but will make American-made goods more expensive, a recipe for pushing up U.S. trade deficits.

“We have had such extreme depreciations of Asian currencies that their goods are going to be available here at fire-sale prices,” Cynthia Latta, economist at DRI-McGraw Hill Inc., said.

So far this year, the trade deficit is running at an annual rate of $114 billion, even worse than last year’s eight-year high of $111 billion. Many analysts believe the troubles in Asia could easily push the deficit for 1998 past $150 billion. That would likely fuel protectionist sentiment in Congress.

For October, the deficit with Japan was up a sharp 14.3 percent to $5.87 billion, the worst showing since April 1995. The figure reflects a big surge in imports of Japanese cars.

The deficit with China, which set a record in September, narrowed a slight 5.9 percent in October to $5.2 billion as American exports climbed to a record $1.4 billion.