U.S. Trade Deficit Rises 7.8% in April

WASHINGTON —  Wider trade gaps with Japan and China contributed to a 7.8% increase in the overall U.S. trade deficit in April despite record exports, the Commerce Department said Thursday.

The exports, totaling $78.4 billion, were not enough to offset record imports of $86.7 billion as the monthly trade gap widened to about $8.4 billion, from a revised $7.8 billion in March.

Still, the April shortfall was smaller than the $10 billion expected by Wall Street economists. Currency traders responded to the report by bidding up the dollar against the Japanese yen shortly after the release of the trade data.

The dollar settled in New York at 113.98 Japanese yen, up from 113.65 yen Wednesday.

Secretary of Commerce William Daley expressed concern about the impact weak demand in Japan was having on U.S. exports and the disappointing trade performance with China as U.S. exports failed to keep up with rising Chinese imports.

“Our trade flows with China continue to be disappointing,” Daley said. “Our exports are 4% below last year’s rate for the first four months, while our imports are up 27%. . . . China’s market is too closed to our exports and we must make every effort to open that market to U.S. goods and services,” he added.

The U.S. trade deficit with China jumped 33.3% to $3.45 billion in April, up from $2.59 billion in March, the department said. The deficit with Japan widened by 5.1% in April, to $4.84 billion, compared with $4.61 billion in March. The department said it was the largest trade gap with Japan since an October 1996 deficit of $4.9 billion.

Japan’s growing trade surplus has become a source of friction between the two countries, and President Clinton said in an interview with Japan’s Fuji television network that he was worried about the imbalance of trade. He spoke with Japanese journalists before leaving for a meeting in Denver of the leaders of the Group of 7 industrialized nations.

Japan’s trade surplus, which jumped more than 200% in May from a year earlier, is expected to be a topic of discussion at the economic summit. The Japanese surplus with the United States surged by 93% in May, and Washington wants Tokyo to boost consumer demand and make sure Japanese economic deregulation is done in a way that provides more opportunities for foreign products in Japanese markets.

Lawrence Chimerine, chief economist with the Economic Strategy Institute think tank, said he sees a further deterioration this year in the U.S. trade deficit with Japan.

“I don’t think this is the worst yet,” he said. “We are still going to see the impact of the very strong dollar in recent years against the yen push up our trade deficit with Japan in the months ahead even further.”

It often takes many months for currency changes to work their way through the economy, and analysts say it may be a while before the benefits of recent declines in the dollar against the yen begin to show up in trade data.

Norwest Corp. chief economist Sung Won Sohn said he was beginning to see some light at the end of the tunnel for U.S. trade deficits. The weakening value of the dollar and a slowdown in what has been robust U.S. economic growth should slow the steady rise in imports, he said, while the economies of Europe and Japan should pick up some steam and help U.S. exports.

In a separate report, the Commerce Department said the first-quarter current account deficit--the broadest measure of trade because it also includes changes in investment flows between countries as well as government grants made to other countries--rose to $40.97 billion from $36.87 billion in the previous three months.

A key reason was a shift to a net loss on investment income caused by more money being paid to foreigners on their U.S. holdings than was being received by Americans on their overseas investments.

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U.S. Trade Deficit

In billions of dollars:

April: --$8.36

Source: Commerce Department