Trade Deficit Surges 25% to $10.3 Billion --- Imbalance With Japan Is Largest in Two Years; Chinese Gap Widens 9%
WASHINGTON -- The U.S. trade deficit ballooned to $10.3 billion in July, a 25% jump over June, reflecting substantial increases in deficits with Japan and China.</br></br>The deficit with Japan rose to $5.2 billion, the largest gap in about two years and a 27% increase over June. U.S. exports to Japan declined by $478 million to $5.3 billion from the prior month, while imports from Japan increased by $629 million to $10.5 billion. About half the import surge reflected higher auto shipments from Japan. While auto makers complain about Japanese barriers to their products, much of the gap reflects the weakness of the Japanese yen, which makes Japan's auto exports less expensive in the U.S.</br></br>The trade deficit with China increased 9% to $4.7 billion in July. Most significantly, U.S. exports to China rose a meager 4% in the first seven months of 1997, to $6.9 billion, from a year earlier, while imports galloped ahead by 25% to $32.8 billion. That bleak pattern of trade -- surging imports, nearly flat exports -- undermines the Clinton administration's contention that expanding ties with China will boost jobs in the U.S. Commerce Secretary William Daley is heading to China in two weeks and says he will make it a "top priority" to press Beijing to open markets.</br></br>Despite vast trade deficits since 1993, U.S. economic growth has accelerated over that time, reducing the trade numbers' economic significance. Even though the deficits diminish the gross domestic product, other factors keep the economy growing. For instance, imports put pressure on domestic companies to innovate, eventually increasing domestic output and restraining price increases for consumers.</br></br>However, the trade deficit has broad political implications, especially when increases in imports harm powerful U.S. industries. For that reason, the escalating deficit with Japan is increasing Clinton-administration pressure on Tokyo to open its markets further to imports and restrain exports.