An Analysis of the 1977 U.S. Trade Deficit

Abstract

IN 1977, the merchandise trade accounts of the United States recorded the largest deficit to date-$31.4 billion. Viewed in historical perspective, any U.S. trade deficit is an unusual occurrence: until 1971, the U.S. trade balance had been in surplus throughout the twentieth century. In 1977, the United States had a deficit of 1.7 percent of the gross national product, or 11.5 percent of the combined value of merchandise exports plus imports. (By comparison, Italy's trade deficit in 1974 was 10.3 percent of trade value; the deficit of the United Kingdom was 4.7 percent in 1967 and 12.1 percent in 1974.) The U.S. invisibles account showed a substantial surplus, however, so that the estimated current-account deficit in 1977 of $19.3 billion was 7.1 percent of the value of merchandise trade. The present U.S. trade deficit is particularly conspicuous because the balance has declined precipitously since late 1975. In 1975:4, the trade balance (seasonally adjusted annual rate) was an $8.9 billion surplus; one year later it had become a deficit of $14.4 billion, and by 1977:4, the deficit had grown to $35.5 billion. This change in the trade balance resulted from a slow growth in the value of U.S. exports (an increase of 7.1