The U.S. Trade Deficit: Is the Sky Really Falling?

After a lapse of some years, the U.S. trade deficit is in the headlines again. In January 1995, the deficit in goods trade increased to a near record $16.9 billion before backing off to $14.2 billion in February. In 1994, the annual excess of goods imports over exports was a record $166.6 billion, over $7 billion more than the previous 1987 record. A record positive balance on trade in services of $60.0 billion tempered the size of the overall deficit; nonetheless, the overall deficit on international transactions (including unilateral transfers and investment income payments) stood at $155.7 billion in 1994, the second largest since 1987 and up sharply from the 1993 deficit of$103.4 billion.