Deficit Balloons to all time high
August 19, 1999
Washington — WASHINGTON (AP) America’s trade deficit mushroomed to an all-time monthly high in June as a flood of foreign cars, computers and clothing sent imports to a record level, overwhelming a small rise in exports.
The Commerce Department reported today that the trade deficit ballooned to $24.6 billion in June a 16.3 percent increase from the $21.2 billion deficit in May.
Imports of goods and services rose a hefty 3.9 percent in June to a record $103 billion. At the same time, U.S. exports managed a 0.5 percent gain to $78.3 billion, only the second increase this year.
Through the first half of this year, the U.S. trade deficit was running at an annual rate of $236 billion 44 percent above last year’s $164.3 billion, which had been a record high.
The Labor Department reported today that the number of Americans filing new claims for unemployment benefits rose for a third consecutive week, climbing to 287,000, an increase of 4,000.
Economists had been expecting an even bigger rise. They view any number below 300,000 as an indication that the labor market is extremely tight. The government reported last week that the unemployment rate in June was 4.3 percent, near a three-decade low.
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The trade deficit set records in five of the last six months. American manufacturers and farmers are struggling to cope with the loss of markets caused by the Asian financial crisis while U.S. consumers, bolstered by the lowest unemployment levels in three decades, have been snapping up foreign products.
The huge jump in the deficit in June caught analysts by surprise. Many had been forecasting a slight narrowing on the belief that American exporters were finally seeing some improvement as Asian economies began to recover from steep recessions.
The slight gain in exports only pushed overseas sales back to their November levels.
The soaring trade deficit has created major political headaches for the Clinton administration, which has had to deal with rising cries in Congress for protectionist legislation to help U.S. industries, including steel. The administration contends that raising U.S. barriers to foreign products would send the wrong signal at a time when the U.S. economy is outperforming the rest of the world in spite of the huge trade deficit.
Congress has created a 12-member commission of prominent trade experts to look at the causes of the deficit and recommend solutions.
America’s politically sensitive deficit with Japan ballooned by 19.3 percent in June to $6.3 billion for the month. And, the monthly deficit with China also rose by 7.9 percent to $5.7 billion, the worst showing since September even though American exports to China posted their best gain of the year.
The deficit with Mexico, one of the America’s partners in the North American Free Trade Agreement, swelled 9.4 percent in June to $2.5 billion as imports from that country climbed to an all-time high.
The huge deterioration in June’s trade deficit reflected widening trade gaps with most of the world. America’s deficit with West Europe jumped 39 percent to $4.9 billion as imports from that region also set a record high.
The $3.9 billion increase in imports was led by a jump of $874 million in shipments of foreign cars and parts. Other big gains were registered by clothing, which climbed by $282 million; computers up $422 million; and telecommunications equipment, up $254 million.
America’s foreign oil bill rose 3.7 percent in June to $5.5 billion as crude oil imports climbed to the highest level since November 1997. The average price per barrel dipped slightly to $14.52 in June, but even with a two-cent drop remained 58 percent higher than the price at the beginning of the year.
The rise in exports was led by a $424 million jump in sales of American autos and parts, which climbed to $6.5 billion, their highest level since July 1977.
Sales of American farm products, led by gains in corn and beef sales, were up $135 million to $3.9 billion but for the year were still 7 percent behind 1998. Farmers, suffering through the worst economic times in more than a decade, have also been hit by severe drought in many parts of the country.