U.S. Trade Deficit Raises Concern Among Pacific Nations
HONG KONG (AP) _ The unexpected surge in the U.S. trade deficit gave export-fueled Pacific Rim nations the jitters Friday as the dollar tumbled to record lows and fears of American protectionism deepened.
The record $17.6 billion deficit run up by the United States in October was ″extremely unwelcome news,″ said Jimmy McGregor, director of the Hong Kong General Chamber of Commerce. ″The fear is that the U.S. protectionist lobby will now be given the kind of fillip they’ve been looking for.″
In Washington, Speaker of the House Jim Wright reacted to the deficit report on Thursday by saying trade legislation would be a top priority when Congress returns next month.
A comprehensive trade legislation bill now being considered by a House- Senate conference committee could carry strong protectionist measures that President Reagan has vowed to veto.
The latest trade statistics said the United States chalked up large deficits in October with many of its Asian trading partners - $5.86 billion with Japan, $1.78 billion with Taiwan, $1.02 billion with South Korea and $724 million with the British colony of Hong Kong.
News of the deficit sent the dollar plunging Friday to a 40-year low of 128.75 Japanese yen in Tokyo and a record low of 29.11 against the Taiwan dollar. The dollar also fell to its lowest level against the Hong Kong dollar since that currency was pegged at 7.8 to one U.S. dollar in 1983, falling to 7.754.
Officials in Washington want Asia’s ″Little Dragons″ - the newly industrializing countries of South Korea, Taiwan, Hong Kong and Singapore - to increase the value of their currencies against the U.S. dollar to help narrow the American trade deficit.
A weakening of the U.S. dollar helps American products compete overseas while making foreign goods more expensive in the United States.
″The growing huge American trade deficit will trigger resumed pressure on the four ‘Little Dragons,’ and Taiwan will be the main target,″ said Liang Kuo-shu, chairman of the Chang Hwa Commercial Bank in Taiwan.
In Hong Kong, David Nendick, the colony’s secretary for monetary affairs, repeated the government’s oft-stated position of not changing the official exchange rate. ″We are not going to give in to speculative pressures,″ he said.
Hong Kong officials believe maintaining the link to the U.S. dollar is essential to political and financial stability in the decade leading up to 1997, when the territory will revert to Chinese sovereignty.
Meanwhile, South Korea is resisting U.S. pressure to appreciate its currency, the won, faster against the dollar. The won has risen 8.3 percent against the dollar this year.
Seoul favors easing tariff and non-tariff restrictions to boost imports without damaging its export business.
The Taiwan dollar has appreciated at a faster clip, climbing 37 percent against the U.S. dollar since January 1986, but Washington says the currency is still undervalued.
The nervousness caused by the U.S. trade deficit in October was reflected in the region’s stock markets, which declined on the news.
On the Tokyo Stock Exchange, the Nikkei Stock Average of 225 selected issues fell 245.03 points, a 1.1 percent drop to end the week at 23,035.81 points.
In Hong Kong, the Hang Seng Index of blue-chip stocks slid 1.9 percent, shedding 38.09 points in very light trading to close at 1,989.58.
The main stock index on the Taiwan exchange dropped 21.59 points to 2,746 points, a 1 percent fall that saw 49 of the 141 listings posting the market’s maximum loss of 3 percent.