Magazine article Insight on the News

Deficit Hits Record High

Magazine article Insight on the News

Deficit Hits Record High

Article excerpt

The $21.5 billion U.S. goods trade deficit is the highest ever, pushed to record levels by the Asian financial crisis, a strong dollar and low oil prices. Analyst say the worst is yet to come.

The U.S. trade deficit jumped 9.5 percent to a record $14.5 billion in April, reflecting a nose dive in exports to Asia and declining sales to much of the rest of the world.

Hardest hit were American farmers and aircraft manufacturers, according to the Commerce Department. Farm trade surplus dived 30 percent, while aircraft sales plummeted 36 percent. Exports overall declined 2.6 percent to $77.1 billion, while imports edged down 0.9 percent to $91.6 billion.

The United States' lopsided trade relationship with the world has worsened rapidly as the Asian financial crisis has reduced growth in U.S. exports there. American consumers have became the main economic engine struggling to pull Asia out of a deep recession through the purchase of Asian imports.

"If this is the Asian flu, it may be a killer variety," says Howard Lewis, vice president of the National Association of Manufacturers. Exports have plunged by 25 percent to Asian countries such as South Korea and Japan in the last year, he notes. But an 11 percent drop in imports from Asia is even more disturbing. The trend suggests that Asians can't find enough money to ship their products to the United States for sale.

Analysts say the worst trade-deficit news is yet to come, once the much-anticipated flood of cheap imports from Asia washes up on U.S. shores. "Clearly, it is in America's interest to keep the lights on in other economies, but an emergency generator will only work for so long," says Lewis, who believes that Japan, the world's second-largest economy, must take steps to revive growth and start importing goods from its neighbors.

While Asia remains the biggest sore spot for the United States -- the trade deficit includes a 14 percent surge for China -- a Commerce Department report shows the trade gap also ballooned because of a deterioration of sales to Europe, Russia, Canada and other countries. …

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