Asian crisis pushes U.S. trade deficit up
WASHINGTON (AP) -- The effects of the Asian economic crisis
crashed upon America's shores in January, swelling the U.S. trade
deficit to $12 billion with the imbalance in goods climbing to an all-time
high.
The sharp increase led to sharp words from the Clinton administration,
which used the strongest language yet to urge Japan to do more to
stimulate its domestic economy as a way of boosting growth in the rest
of Asia and reversing a widening trade gap with the United States.
''If the Japanese economy doesn't get moving, the likelihood of these
other economies improving is rather slim,'' Commerce Secretary
William Daley said. ''They are the key player.''
The Commerce Department reported today that the overall deficit in
goods and services rose 10.5 percent from a revised December figure
of $10.9 billion with the imbalance with the newly industrialized Asian
nations rising to the highest level since 1990.
The January trade report offered the most dramatic proof yet that the
Asian crisis will have negative effects on the American economy. Most
economists believe that overall growth could be slashed by as much as
a full percentage point this year as the U.S. trade deficit skyrockets.
The administration, worried about rising deficits, for months has been
pressuring Japan, the world's second largest economy, to do more to
stimulate domestic demand through tax cuts and increased public works
spending as a way of providing markets for Asian goods.
In unusually frank language, Daley mentioned the weak Japanese
currency as one of the problems faced by the United States, a
departure from past administration practice of only allowing Treasury
Secretary Robert Rubin to make comments about currency levels for
fear of roiling financial markets.
''In Japan, we still face a weak yen, a stagnant Japanese economy and
significant trade barriers. All of these problems contribute to our
persistent trade problems with that country,'' Daley said.
Up until now, the Asian crisis has provided mostly positive benefits for
the U.S. economy with investors rushing to the safety of U.S.
investments, helping to push interest rates down sharply and spurring
housing and other interest-sensitive sectors of the economy.
But in testimony to Congress last month, Federal Reserve Chairman
Alan Greenspan cautioned that policymakers had to be alert to the
dangers from the ''storm clouds'' from Asia. Various Asian currencies
plunged last year as investors became concerned that decades of
super-charged growth in the region was coming to an end.
The steep drop in currencies means that U.S. products are now more
expensive in Asian markets while Asian goods are cheaper for
Americans.
For January, the U.S. deficit with South Korea, America's fifth largest
export market, rose to $856 million, more than double the December
level. The deficits with Indonesia and Thailand, two other countries
hard hit by the crisis, were also up in January.
For the newly industrialized countries of Asia, including South Korea,
Hong Kong, Singapore and Taiwan, the U.S. deficit rose to $2.2 billion,
the biggest imbalance since a $2.4 billion deficit in July 1990.
America's deficit with Japan actually shrank in January by 14.7 percent
to $4.38 billion, but the imbalance with China rose by 9.7 percent to
$4.24 billion. Many experts believe this could be the year that
America's deficit with China surpasses Japan, which for decades has
been the country with which the United States had the biggest trade
imbalances.
The trade deficit for all of 1997 rose to $113.7 billion, the worst
showing in nine years. If the January imbalance of $12 billion held
steady for all of 1998, the deficit this year would climb to a record $144
billion.
The $12 billion January deficit was the worst showing since the final
quarter of 1987 when the deficit in goods and services averaged more
than $12 billion per month.
In goods alone, the $18.8 billion deficit was an all-time high, surpassing
an $18.17 billion imbalance in January 1997. This goods deficit was
offset somewhat by a $6.75 billion surplus in services, such as airline
fares.
The overall deficit reflected a 2.6 percent drop in U.S. exports of goods
and services, which dipped to $77.28 billion, reflecting a big $1.8 billion
drop in sales of American aircraft abroad.
Imports were down 1 percent to $89.33 billion in January, in part
reflecting a lower foreign oil bill. Energy imports dropped 13 percent to
$4.81 billion with the price per barrel of crude oil dipping to $14.42,
compared to $16.21 in December.
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