WASHINGTON — Asia's mounting economic troubles took another big bite out of U.S. exports to that region in April, sending America's foreign trade deficit soaring to a record level, the government reported Thursday.
Commerce Department figures showed that, largely because hard-hit Asian economies bought fewer U.S. exports, the United States imported $14.5 billion more than it exported over the month--up from a revised $13.2-billion deficit in March.
The figures provided another round of evidence that the Asian financial crisis and its aftermath are likely to have a larger-than-predicted effect on the U.S. economy, slowing growth here at home from the robust pace of the past several months.
The April figures were compiled well before President Clinton's initiative this week to help stem the slide of the Japanese yen in the foreign exchange markets. The yen's decline against the dollar aggravates the trade imbalance by making U.S. exports to Japan more expensive and imports from there cheaper.
Not all of the increase in the April trade deficit came from a worsening in the nation's trade position. A portion also reflected changes the Commerce Department made in April in the method it uses to adjust the trade figures to reflect seasonal patterns.
Still, the figures bolstered predictions that the U.S. trade deficit will mushroom as a result of the Asian economic crisis, reaching between $150 billion and $160 billion for the year, from a revised $110.3-billion figure in 1997.
The drag from the swelling trade deficit is expected to help slow the vibrant growth of the U.S. economy, reducing prospects that the Federal Reserve Board will raise interest rates later this year to help ward off a new round of inflation.
Sung Won Sohn, chief economist at Norwest Corp. in Minneapolis, said the impact of the Asian crisis on the April figures was "just the tip of the iceberg." He predicted that the export loss would shave at least 1 percentage point from the economy's growth rate in 1998.
The statistics showed that the cumulative U.S. trade deficit with Asian countries soared to $46.7 billion during the first four months of this year, up from $33.7 billion for the same period in 1997.
Commerce Secretary Bill Daley said U.S. exports to Japan for the first four months of 1998 were 10% below the level for the same period last year. Exports to South Korea declined 45%; Indonesia, 43%; Thailand, 26% and Singapore, 11%. Exports to China were up 12%.
Besides drying up U.S. export markets in Asia, the slump there also is expected to prompt cash-strapped Asian countries to push harder to sell their own exports in the United States. With most of their currencies devalued, they now have a price advantage as well.
Cynthia Latta, economist for Standard & Poor's DRI, a Cambridge, Mass., economic forecasting firm, said that the biggest hit on the U.S. economy so far has come from the shriveling of U.S. export markets in Asia rather than from any flood of Asian imports here.
A sizable surge of Asian imports recorded in the March report failed to repeat itself in April, Thursday's figures showed. Overall, U.S. imports from around the world actually fell during April, dropping to $91.6 billion, from $92.4 billion the previous month.
Nevertheless, U.S. trade deficits with almost every major Asian country grew. The deficit with China rose to $4.3 billion in April, up from $3.8 billion in March. That with Taiwan edged up to $1.1 billion in April, up from $1 billion the previous month.
Even so, the pattern was irregular. The U.S. trade deficit with Japan actually fell during April, dipping to $5.4 billion, from $5.8 billion in March, and that with South Korea fell to $519 million over the month, from $659 million in March.
Trade patterns with other major U.S. trading partners also were mixed. The U.S. trade deficit with Mexico fell to $1.3 billion in April, from $1.4 billion in the previous month. And the deficit with Canada rose to $1.2 billion, from $866 million in March.
Economists say that in the short run, at least, the rising U.S. trade deficit is nothing for Americans to worry about. The deficit is growing because the dollar buys more than it did a few years ago, and Americans are prosperous and in a mood to spend.
At the same time, the huge flow of imports puts pressure on U.S. manufacturers to hold their prices down, helping to ward off a revival of inflation. In the bargain, American consumers have a far wider choice of what to buy.
An export slowdown, however, cuts into U.S. manufacturing profits and jobs, a double hit for those companies that are also competing with newly cheap imports.
As a result, the soaring trade deficit is likely to heighten political tensions, especially in Congress, which already has begun to complain that the United States is losing ground in the global marketplace.
And eventually, a rising trade deficit is likely to cause the dollar's value to decline, adding to inflation pressures and possibly prompting the Federal Reserve Board to consider raising interest rates to stop the slide.
In a separate report, the Commerce Department said the U.S. current account--the broadest measure of America's global trade and financial transactions--posted a $47.21-billion deficit during the first quarter of 1998, up from a revised $45.04 billion in the final quarter of 1997.
Besides trade in goods and services, the current account includes statistics on foreign investments in U.S. assets, stocks and government securities and on payments for services. It also counts income from foreign investment. The figures are compiled quarterly.
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