Newspaper article THE JOURNAL RECORD

Trade Deficit Falls to $135.3 Billion

Newspaper article THE JOURNAL RECORD

Trade Deficit Falls to $135.3 Billion

Article excerpt

WASHINGTON (AP) - The deficit in the broadest measure of U.S. trade narrowed to $135.3 billion last year for the best showing since 1985, despite a steep deterioration in the balance on investment earnings, the government reported Tuesday.

The Commerce Department said the deficit in the current account, also known as the balance of payments, shrank 12.1 percent from the record imbalance of $153.96 billion set in 1987.

The current account is the most important trade statistic because it measures not only trade in merchandise but also transactions in investments and other services.

The big improvement last year came entirely from merchandise trade, where the deficit shrank by 21.1 percent to $126.5 billion. This reflected a 28 percent surge in American export sales, which was enough to offset a 9 percent rise in merchandise imports.

However, in an ominous sign for the future, the nation's surplus in the investment category shrank by 76 percent last year to a slight $4.78 billion, down from $19.76 billion in 1987.

This decline reflected the fact that foreign holdings in the United States have increased to such an extent that foreign investment earnings now rival and, economists say, will soon surpass American investment earnings overseas.

As recently as 1981, the United States ran surpluses in its current account because the nation's cushion in overseas investment earnings was enough to offset perennial deficits the country ran in merchandise trade.

However, in this decade, Americans have handed over billions of dollars to foreigners in exchange for imported goods. This development has transformed the United States from the world's largest creditor nation, a position now held by Japan, to the world's largest debtor country.

Simply put, that means that foreigners now own more in U.S. investments than Americans hold in overseas investments. …

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