WASHINGTON — America's record-setting economy is poised to smash one more record today when the government announces that the nation's colossal addiction to foreign goods drove the trade deficit to about $270 billion last year.
It's not an occasion for celebration, although whatever the precise number, "It's going to be big," promised Nariman Behravesh, chief international economist at Standard & Poor's DRI in Lexington, Mass.
Yet, remarkably, hardly anyone is complaining. Few economists see the huge imbalance as an imminent threat to prosperity. Financial markets are blissfully unbothered. Trade woes have not become a rallying cry in the presidential campaign.
In fact, many experts note, the trade deficit perversely reflects good economic news--the affluence of American consumers, who have been spared the hard times that much of the rest of the world has suffered in the last few years.
Such an enormous trade gap is not without risks. But they lurk somewhere in the future, a consequence of the massive amount of dollars that Americans send overseas when they buy foreign goods.
If foreign investors lose confidence in America's economy--and their appetite for holding all those dollars--the U.S. currency would slide in value, interest rates could soar and the cost of many imports would shoot upward, imperiling the record economic expansion. Signs of inflation or a crash on Wall Street are two of the most commonly mentioned trigger points for such a loss of confidence.
"The good news is that foreigners have been happy to pour investments into the U.S. economy," Behravesh said. "The big question is, what happens if their perception of the United States changes? At that point, the trade deficit becomes a vulnerability."
The trade gap also remains a smoldering political concern, providing black-and-white evidence of import waves that can crush American jobs, even at a time of exceptionally high employment.
Just last Friday, President Clinton imposed punitive tariffs on certain steel imports in a bid to save 5,000 American jobs. The move was perceived overseas as election-year protectionism, and foreign countries threatened to challenge its legality in the World Trade Organization.
At home, the tariffs underscored the trade deficit's potential to combust in controversy when the jobless rate starts to move upward and more voters end up on the unemployment line.
