If the U.S. economy is to negotiate a soft landing, it will need help from friends overseas. But economist Lacy H. Hunt of HSBC Holdings Inc. warns that the widely anticipated improvement in America's export performance may prove largely illusory.
To be sure, U.S. imports are now slowing and exports have looked strong in recent months. Wage restraint, restructuring, and record investment have boosted America's competitiveness. Even in dollar terms, unit labor costs have risen more slowly than in Japan or Germany over the past decade. And with the dollar down some 20% against the yen and mark this year alone, the U.S. is now the low-cost producer among industrial nations.
The problem, says Hunt, is that economic developments abroad are constraining appetites for U.S. goods. Of America's five biggest customers last year (chart), the three largest--Canada, Japan, and Mexico--are all on the edge of or in recession, while growth is slowing in Britain and may be sputtering in Germany. Weak currencies in Canada and Mexico have also raised the prices of U.S. goods in those nations.
In its latest world trade outlook, the International Monetary Fund predicts that import growth of industrialized countries will slow from 10.8% last year to 7.8% this year and to just 5% in 1996. While U.S. exports will gain ground in emerging Asia, they are headed down in such Latin American nations as Mexico and Argentina.
The upshot is that a declining U.S. trade deficit could paint a false picture of health. "If it were due mainly to falling imports rather than export expansion," says Hunt, "it would really be a sign of economic weakness."