US trade gap soars to $12.2bn

America's deficit in trade in goods and services hit a record $12.23bn (£7.9bn) in January, partly due to the Mexican crisis. Officials played down the shock figure, but it was billions of dollars higher than the financial markets had expected.

Exports fell by nearly $3bn and imports rose by $2bn to a record $72.93bn. Trade in goods, rather than services, accounted for most of the damage.

Ron Brown, the US Commerce Secretary, said that the growing trade deficit was a matter of concern. But he said there would be renewed economic vigour in America's trading partners, which would have a ``significant impact'' in cutting the deficit.

Mr Brown said the huge jump from $7.3bn in the red in December to $12.2bn the following month was an ``aberration''. The Commerce Department would investigate whether there were any problems with the adjustment of the figures for seasonal variation, he said.

Nevertheless, in a statement of the obvious, a White House spokesman admitted the sharp jump in the deficit showed the need to open up more overseas markets.

One erratic contribution to the January deficit was a $1bn drop in overseas sales of civilian aircraft. Orders are typically very big, making for volatile figures. But January sales of $524m were the lowest since February 1978.

US exports of capital goods were lower than imports for the first time. This was a watershed, as capital goods - machinery and transport equipment - make up two-fifths of American exports.

US trade with Mexico moved from a small surplus in December to a $863m deficit. Reports from Mexico had already made it clear that the massive devaluation of the peso had cut its imports dramatically.

Last year a tenth of US exports went to Mexico, its fastestgrowing overseas market for goods. The Mexican austerity plan will ensure that the country's demand for US goods will stay depressed.

This was not the only reason for the trade shock, however. America's deficit with Western Europe soared from $206m to $1.3bn in January. This came as a complete surprise, as growth and import demand in most European economies have started to pick up.

A third region with which the US moved deeper into the red was China. The deficit rose by $700m to $2.7bn. Trade with Taiwan, Korea and Hong Kong also took a turn for the worse, although there was a small improvement in the enormous bilateral deficit with Japan. It narrowed to $4.9bn.

Everett Erlich, the Commerce Undersecretary, said Japan would have to open up its markets further. ``I don't think we can talk about the situation being dramatically improved so long as formal structural barriers to trade exist,'' he said.

Mickey Kantor, the US trade representative, said yesterday that there could be an announcement later this week of a date for trade talks with Japan to restart.

There were mixed opinions among economists about how quickly the deficit might improve. Ian Harwood at Kleinwort Benson in London said: ``Demand for US goods in Europe and Japan is likely to improve'' He said they were robust markets, and the weak dollar had enhanced US competitiveness.

Chris Iggo, an economist at Chase Manhattan in New York, said: ``Foreigners have made big inroads into the US market even though the dollar has been falling for 10 years. Americans spend too much and save too little.'' He thought the trend in trade would not improve until the US recovery slowed.

The markets reacted calmly. The dollar drifted against the mark and yen. Wall Street and US government bonds were a little lower by midday.

Britain's balance of payments is expected to swung into the red in the final quarter of last year. Trade in goods showed far bigger deficits in the final three months of 1994. However, British Invisibles expects figures due out tomorrow to show that the surplus on trade in invisibles last year - including services and investment income - was the highest since 1987.

Start your day with The Independent, sign up for daily news emails
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Compliance Manager

£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

SThree: Talent Acquisition Consultant

£22500 - £27000 per annum + OTE £45K: SThree: Since our inception in 1986, STh...

Recruitment Genius: Experienced Financial Advisers and Paraplanners

Negotiable: Recruitment Genius: This extremely successful and well-established...

Guru Careers: FX Trader / Risk Manager

Competitive with monthly bonus: Guru Careers: We are seeking an experienced FX...

Day In a Page

How to stop an asteroid hitting Earth: Would people co-operate to face down a global peril?

How to stop an asteroid hitting Earth

Would people cooperate to face a global peril?
Just one day to find €1.6bn: Greece edges nearer euro exit

One day to find €1.6bn

Greece is edging inexorably towards an exit from the euro
New 'Iron Man' augmented reality technology could help surgeons and firefighters, say scientists

'Iron Man' augmented reality technology could become reality

Holographic projections would provide extra information on objects in a person's visual field in real time
Sugary drinks 'are killing 184,000 adults around the world every year'

Sugary drinks are killing 184,000 adults around the world every year

The drinks that should be eliminated from people's diets
Pride of Place: Historians map out untold LGBT histories of locations throughout UK

Historians map out untold LGBT histories

Public are being asked to help improve the map
Lionel, Patti, Burt and The Who rock Glasto

Lionel, Patti, Burt and The Who rock Glasto

This was the year of 24-carat Golden Oldies
Paris Fashion Week

Paris Fashion Week

Thom Browne's scarecrows offer a rare beacon in commercial offerings
A year of the caliphate:

Isis, a year of the caliphate

Who can defeat the so-called 'Islamic State' – and how?
Marks and Spencer: Can a new team of designers put the spark back into the high-street brand?

Marks and Spencer

Can a new team of designers put the spark back into the high-street brand?
'We haven't invaded France': Italy's Prime Minister 'reclaims' Europe's highest peak

'We haven't invaded France'

Italy's Prime Minister 'reclaims' Europe's highest peak
Isis in Kobani: Why we ignore the worst of the massacres

Why do we ignore the worst of the massacres?

The West’s determination not to offend its Sunni allies helps Isis and puts us all at risk, says Patrick Cockburn
7/7 bombings 10 years on: Four emergency workers who saved lives recall the shocking day that 52 people were killed

Remembering 7/7 ten years on

Four emergency workers recall their memories of that day – and reveal how it's affected them ever since
Humans: Are the scientists developing robots in danger of replicating the hit Channel 4 drama?

They’re here to help

We want robots to do our drudge work, and to look enough like us for comfort. But are the scientists developing artificial intelligence in danger of replicating the TV drama Humans?
Time to lay these myths about the Deep South to rest

Time to lay these myths about the Deep South to rest

'Heritage' is a loaded word in the Dixie, but the Charleston killings show how dangerous it is to cling to a deadly past, says Rupert Cornwell
What exactly does 'one' mean? Court of Appeal passes judgement on thorny mathematical issue

What exactly does 'one' mean?

Court of Appeal passes judgement on thorny mathematical issue