U.S. Trade Gap Widens Almost 20% in October

The nation’s trade deficit took a sharp turn for the worse in October, widening by almost 20% to $10.2 billion as imports reached an all-time record, the Commerce Department reported Friday.

Although the trade gap generally has continued to narrow from its peak in 1987, many economists said they expect little further progress unless the U.S. economy slows enough to curb America’s appetite for imports.

“The trade deficit is no longer declining quickly,” said Donald Straszheim, chief economist for Merrill Lynch in New York, “and it’s unlikely to improve in the future.”

Some analysts, however, noted that several special factors made the trade gap wider in October. Even so, they cautioned that they expect only modest gains in the months ahead.

“Exports were hurt by the Boeing strike, so the current figures may overstate the weakness,” said Donald Ratajzcak, a leading economic forecaster at Georgia State University in Atlanta.

Despite the strike on Boeing’s commercial aircraft production line, which cut into shipments of the nation’s most popular export product, U.S. exports in October rose by more than $300 million to $31 billion. That was close to the record set in June of $31.3 billion.

But a $3-billion surge in imports to $41.2 billion swamped the export gain as the cost of foreign oil shot up and imports of industrial materials and food expanded.

Along with the higher-than-expected October deficit, the Commerce Department announced a sharp upward revision in the September figure, to $8.5 billion from the previously reported $7.9 billion.

Although the United States has practically eliminated its trade deficit with Europe, the trade gap with Japan remains stubbornly wide, at $4.9 billion in October. Trade with Japan represented 43% of the overall U.S. deficit in October.

With Japan now accounting for nearly all of the U.S. trade gap with major industrial nations, lawmakers are starting once again to urge the Bush Administration to crack down on Japanese trading practices and impose new barriers to Japanese products.

But the White House has been able to deflect such demands so far by promising to take further action next year if current negotiations with Japan fail to show results.

The trade deficit “is still moving in the right direction,” White House spokesman Marlin Fitzwater said. “We’re doing exactly the right thing, and no changes are necessary at this time.”

The monthly trade figures have followed an erratic path this year, but the overall gap between imports and exports has continued to shrink over time. The pace has slowed, however, from the dramatic gains chalked up in 1988.

For the first 10 months of the year, the cumulative trade deficit is $91.2 billion, down $6 billion from the deficit for January through October last year and a whopping $37.5 billion lower than the gap over the same period in 1987.

The U.S. trade gap widened with most countries in October. The sharpest swing reflected a turnaround from a $1.18-billion trade surplus with Western Europe in September to a $460-million deficit in October.

The biggest jump in imports was for industrial supplies and materials, which jumped by $1.4 billion, while imports of autos and parts--the biggest category of imported products--leveled off.

The overall monthly trade figures are adjusted for seasonal variations, but the breakdown by countries and products are not.

The disappointing trade showing, which was worse than analysts had expected, contributed to a decline in the value of the U.S. dollar on currency markets Friday. In European trading, the dollar lost ground against most currencies.

“They certainly weren’t good numbers any way you look at it,” one London trader told the Associated Press. “The only thing that might have saved the dollar was the fact that the market was so sparse.”

Time staff writer Oswald Johnston in Washington contributed to this report.