The U.S. merchandise trade deficit declined last month to its lowest level since January, breaking a three-month string of record-setting increases that has intensified congressional pressure for tougher import restraints.
The Commerce Department reported yesterday that the July deficit of $10.5 billion was 22 percent lower than June's record of $13.4 billion -- largely because of substantial drops in oil purchases and imports of Japanese cars.
Even with the July dip, economists said they expect the trade deficit for the year to soar as high as $145 billion to $150 billion -- far above the 1984 record of $123.3 billion. The deficit for the first seven months of the year totaled $81.2 billion, an increase of 10 percent over the 1984 pace.
The July decrease, moreover, seemed unlikely to blunt protectionist pressures building up in Congress, which increased this week when President Reagan overruled an International Trade Commission recommendation to place tariffs or quotas on footwear imports.
Sen. John C. Danforth (R-Mo.), chairman of the Senate Finance Committee's trade panel, noted that a $10 billion trade deficit for a single month is larger than any annual deficit posted prior to l977.
"Clearly, you can't look at a single month for a picture of where we are with foreign trade. What is clear, what no one can doubt, is that this year's trade deficit will be the highest ever," Danforth said.
Underscoring the bipartisan tone of congressional criticism of Reagan administration trade policies, the ranking Democrat on the Senate trade subcommittee, Sen. Lloyd Bentsen (Tex.), echoed Danforth's views. "We still have a very serious trade crisis in this country and we must come to grips with it," he said.
Just back from a six-nation trip to the Far East that largely centered on U.S. trade problems, Senate Majority Leader Robert Dole (R-Kan.) predicted yesterday that Congress would pass some protectionist trade legislation this fall. He criticized the Reagan administration for failing to take a leadership role on the trade deficit, which he said is forcing Congress to assert itself because "Republicans are not going to stand by and be rolled over by the Democrats" on the issue.
Jerry Jasinowski, chief economist of the National Association of Manufacturers, said the July decline in the trade deficit is largely due to a slowdown in the United States' economic growth, which caused a slight tapering off in imports.
"The July trade numbers do not reflect any fundamental improvement in the trade picture," Jasinowski said.
The 20 percent decrease in imports of Japanese cars in July, for instance, is likely to evaporate next month; Tokyo reported shipments from Japan for that month have increased. The July decrease in imports apparently reflected a June lag in shipments from Japan, which had poured cars into this country in April and May with easing of import restraints.
Imports of oil products dropped 19.3 percent in July as both the price and volume decreased. While the worldwide oil glut may keep the price down, oil imports are expected to increase in the coming months as dealers here build up supplies for the winter.
One Reagan administration trade initiative appears to have taken hold, however, as imports of iron and steel products registered sharp decreases. President Reagan ordered negotiated quotas on steel imports starting last October to protect the domestic industry from foreign competition, but the restrictions had failed to stem overseas steel sales until now.
Steel imports from Japan, for example, dropped 38.1 percent from the June totals, which the Japanese Iron & Steel Exporters Association said signaled the start of a long downward trend.
Both total imports to the United States and American exports de-"The July trade numbers do not reflect any fundamental improvement in the trade picture." -- Jerry Jasinowski of the National Association of Manufacturers clined in July. The import total of $27.9 billion was $2.9 billion less than the June figures and $5 billion under the record level of July 1984.
An overvalued dollar, which makes imports less expensive here and raises the cost of U.S. goods overseas, was blamed for America's poor trade performance. Even though the dollar has dropped 13 percent since February, the decline has not been great enough to turn around the trade deficit.
Once again, the monthly U.S. trade deficit was greatest with Japan -- $4 billion, a decrease of $600 million from June. The United States imported $5.9 billion in products from Japan while selling that country goods worth $1.9 billion.
The United States also registered trade deficits of $1.9 billion with Western Europe, including $900 million with West Germany and $522 million with Great Britain; $1.3 billion with Canada; $924 million with Taiwan; and $868.5 million with Mexico.