The nation's merchandise trade deficit surged to $14.5 billion in March, up $2 billion from February, as imports reached record levels and Japan posted its largest monthly surplus with the United States, the Commerce Department reported yesterday.
Sharp decreases in the price of oil kept the deficit from climbing even higher. The only bright spot in the March trade figures was a $1.2 billion rise in U.S. sales overseas.
The rising trade deficit, which hit a record $148.5 billion in 1985 and has not begun to recede even though the administration expects the year's final figure to be no higher than 1985's, is likely to spell trouble for President Reagan. He is faced with an increasingly restive Congress that is questioning his administration's antiprotectionist trade stance and its apparent refusal to get tough with Japan for failing to trim its trade surplus.
The trade deficit also is sapping the nation's growth prospects despite strength in housing and consumer spending, economists said. A separate Commerce Department report yesterday said new factory orders fell 2.3 percent in March, the sharpest monthly decline since April 1984.
The new trade figures, showing Japan's surplus jumped to $5.5 billion last month, was released as Reagan was on his way to Tokyo for an economic summit next week. America's European allies are urging him to press Prime Minister Yasuhiro Nakasone to increase his government's efforts to brake Japan's growing global trade surplus.
Japan meanwhile reported yesterday that its global trade surplus for the first 20 days of April was more than twice as high as in the same period of 1985 -- jumping to $3.91 billion from $1.61 billion. The figures showed imports dropped 7.9 percent despite a year-long Nakasone drive to get the Japanese to buy more foreign products. At the same time, exports grew 17.5 percent.
The Senate is expected to consider trade legislation next week aimed at forcing the Reagan administration to retaliate against Japan unless it buys more foreign goods, especially telecommunications products.
"Protectionism is alive and well in the United States," Treasury Secretary James A. Baker III warned in an interview with the U.S. Information Agency, pointing to congressional moves on trade, Dow Jones News Service reported.
He and Commerce Secretary Malcolm Baldrige agreed that the solution for America's trade deficit is for other industrialized nations to boost their economies.
"While the lower dollar will begin to help in the last half of this year, other nations should stimulate their economies in a noninflationary way to promote worldwide economic recovery and bring trade among nations into better balance," Baldrige said.
Baker, though, said the full effects of the lower dollar would not be felt until the end of 1987.
Baker added, in the interview, which the U.S. Information Agency beamed overseas, that Japan should restructure its economy to decrease its global trade surplus, as was proposed by a blue-ribbon committee in Tokyo. Japan should increase the Japanese public's domestic demand for goods and make the country becomes less dependent on selling overseas, he said, according to Dow Jones.
That plan is favored by Nakasone, who promised President Reagan in early April that he would implement it. But the program has run into spirited opposition within his Liberal Democratic Party, and Nakasone has been less forceful in his statements in Japan about the proposals than he was when he visited Washington.
The trade figures showed March imports reached $33.4 billion, 5.7 percent higher than the average for the past 12 months and $1.8 billion greater than the February totals. The import totals were paced by $25.3 billion in manufactured goods, an area in which the United States once was the world's leading exporter but which last month suffered a $12 billion trade deficit. The value of oil imports decreased $493 million.
While foreign goods continued to flood into the United States, overseas sales of American-made products increased as U.S. goods become more competitive in foreign markets because of the lower value of the dollar.
Commerce chief economist Robert Ortner said the increase in both imports and exports illustrated a phenomenon economists call the "J curve," which shows the initial effects of a falling dollar as a worsened trade balance: The higher cost of imports caused by the lower dollar is felt in the deficit totals before domestic producers begin selling more overseas.
Ortner said trade balances will get worse until Americans start buying more U.S. products, which Baldrige predicted will happen in the last half of this year.