Posted on: Saturday, August 18, 2001
Trade deficit widens to $29.4 billion
By Jeannine Aversa
Associated Press
WASHINGTON — The trade deficit widened in June as slumping demand in the United States and abroad pushed exports and imports down to their lowest levels in 16 months.
The Commerce Department reported yesterday that the trade imbalance increased slightly by 3.3 percent to $29.4 billion in June. The drop in exports was larger than that for imports, causing the trade gap to expand.
Still, June's trade deficit was the second smallest deficit this year, behind May's $28.5 billion. June's trade shortfall was well below the record monthly trade deficit of $34.5 billion registered in September 2000.
On Wall Street, the drop in exports, investors' concerns about profits and an appeals court decision against Microsoft all combined to send stocks tumbling. The Dow Jones industrial average lost 151.74 points to close at 10,240.78.
Exports of goods and services fell by 2 percent to $86 billion in June as economic turmoil overseas sapped demand.
That decline comes as U.S. manufacturers complain that the value of the dollar is too strong, making their goods expensive abroad. They have been pressing the Bush administration to take steps to change that.
"Sluggish growth overseas coupled with the overvalued dollar will mean that exports will not likely be a source of growth for U.S. manufacturers any time soon," said National Association of Manufacturers economist David Huether.
Meanwhile, imports of goods and services, hurt by flagging demand because of the ailing U.S. economy, declined in June by 0.7 percent to $115.4 billion.
June levels of both exports and imports were the lowest since February 2000.
The latest snapshot of trade activity comes as President Bush seeks unilateral authority to negotiate any trade accord on behalf of the United States, something Congress refused to give former President Clinton.
Bush faces stiff opposition on Capitol Hill for such "fast-track" trade authority. Many lawmakers want to condition further trade liberalization on improving environmental and labor standards abroad.
Administration officials say fast-track authority would help the sagging economy by lifting tariffs that discourage other countries from buying American goods and services.
But organized labor and other critics contend jobs would be lost and the environment would suffer if Bush were given unfettered power to negotiate trade deals.
Sales of U.S.-made capital goods, such as semiconductors and drilling equipment, fell by $1.2 billion in June to $27.1 billion. Exports of consumer goods, including artwork, pharmaceuticals and jewelry, declined by $768 million in June to $7.4 billion.
Exports of industrial supplies, such as chemicals and metals, were down by $420 million in June to $13.5 billion, the lowest since October 1999.
In a bright spot, exports of automobiles, engines and parts grew by $297 million to $6.6 billion in June, the highest level since August 2000.
Kathleen Cooper, the Commerce Department's undersecretary for economic affairs, said the strong value of the dollar "has had some influence" in the decline of overall exports.
However, she added, "There is no way to disentangle exactly how much of it is due to the currency level of the dollar itself versus the economic performance. In fact, what I tend to emphasize ... is that indeed it is the relative economic performance both in the U.S. and in other countries that is the more important influence."
On the import side, sales to the United States of industrial materials, including energy products, chemicals and steel, declined by $745 million to $23.9 billion. That was the lowest level since April 2000. Imports of capital goods, including computers, planes and medical equipment, decreased by $282 million to $24.3 billion, the lowest level since May 1999.
Meanwhile, the United States' politically sensitive deficit with Japan widened by 3.8 percent in June to $5 billion. The U.S. deficit with China grew by 7.6 percent to $6.6 billion. The deficit with Mexico widened to a record $3.1 billion.
The government has estimated the U.S. economy grew at a 0.7 percent rate in the second quarter. Some analysts project the government's revised second-quarter estimate, released later this month, will show the economy didn't grow at all or actually slipped into reverse.
Those lower estimates are mostly a result of big inventory reductions by business, which subtract from Gross Domestic Product. June's wider trade deficit should contribute little, if at all, to a downward revision to second quarter GDP, economists said.
