US Trade Gap Hits New High, but Maybe That's Not So Bad New Stats Show Crisis in Asia Is Slowing US Exports, but This May Keep America's Economy from Overheating
Ron Scherer, writer of The Christian Science Monitor, The Christian Science Monitor
The Asian crisis is starting to affect Main Street.
Orders are drying up for beef from Wyoming, soybeans from Iowa, cotton from Louisiana, pork from Illinois, and apples from Washington. At the same time, trucks are whisking low-cost computers from Korea, dresses from Thailand, and shoes from Kuala Lumpur to US retailers.
Yesterday, the US Commerce Department said this trade gap swelled to a record $14.5 billion in April, up 9.5 percent from March, the previous record. The surging numbers are the result of a deep slump in Asia and a strong US economy, which is sucking in imports. However, perhaps surprisingly, there is little outcry over the surging imports. "We've been looking for ways to slow our growth," says Bob Dederick, a consulting economist with Northern Trust Company in Chicago. "So we should only be concerned about the trade deficit if it creates a bigger-than-expected drag on the economy." Economist Bruce Steinberg of Merrill Lynch & Co. in New York adds there is no need to be concerned. "It's our global duty to be the importer of last resort," he argues. This is a major shift in the way the trade deficit was viewed in the mid-1980s, when the US was also running a record trade imbalance. The trade gap came when the US budget was deeply in the red. Economists referred to them as the "twin deficits." Now, the US budget is in surplus. And, the trade number is viewed in a positive light. In fact, the growing tide of imports is helping to keep domestic prices down. So far this year, the total price of imports is down 3.5 percent. However, the prices of some products made in Asia are off even more. "Some Asian companies are desperate - they're hoping if they ship it here, someone will buy it," says David Wyss, an economist at McGraw-Hill Companies in Lexington, Mass. The trade-deficit numbers were higher than Wall Street economists expected. But they had little impact on the markets, which were still digesting the US Treasury's currency intervention on Wednesday. The government sold dollars to support the sliding Japanese yen. Now, currency traders are waiting to see what happens when US officials meet with Japanese officials today and tomorrow. …