Remember the recession of the late 1980s and early 1990s? Those were the days when foreign companies bought Rockefeller Center, Hollywood was making movies about scary Japanese bosses and some Americans worried that trade was destroying their jobs. In that recessionary period, American imports stagnated, rebounding only when the mid-1990s economic boom kicked in.

As America trudges through another recession, U.S. imports are again stagnating. In fact, trade experts expect imports to remain weak for a while, a development that may damage many foreign nations’ economic health.

Hard-Hit Sectors

Even before the Sept. 11 attacks, the economic slowdown buffeting America had hit imports hard. The U.S. trade deficit was contracting by July, 2001, amid shrinking demand for foreign materials and foreign finished goods.

“Global stagnation threatens export growth in emerging markets, while the shift towards government spending [in the U.S.] may reduce import penetration in the U.S., by far the world’s biggest export market,” Credit Suisse First Boston, an investment bank, says in a research note to clients.

According to a World Bank report: “Growth in trade has undergone one of the most severe decelerations in modern times.” Terror-shocked consumers did little shopping during the 2001 Christmas holiday period, and analysts predict weak demand for imported retail goods through the middle of 2002. U.S. companies have been forced to rethink their reliance on just-in-time inventory methods because they may no longer work if global shipping continues to be slowed by tight security regulations.

“There may be some change in companies’ cost-benefit analysis regarding just-in-time inventories,” says Van Doorn Ooms, director of research at the Committee for Economic Development, a New York-based organization that performs business policy research. This change will hurt: Peter Morici, a senior fellow at the Economic Strategy Institute, a Washington think-tank, estimates that increased security measures and a shift away from just-in-time inventory could shave as much as 0.5 percent off America’s gross domestic product.

Protectionist Thoughts?

Meanwhile, American steel companies have ridden a wave of patriotism and used Washington contacts to convince the Bush administration to protect American steel with tariffs of up to 40 percent. According to several trade analysts, these tariffs are sure to anger European and Asian steel producers and lead to a dramatic drop in exports of steel and other raw materials to the United States.

Given that America appears to be in a “U-shaped” recession, one in which any economic rebound will develop very slowly, few economists or businesspeople expect U.S. imports to pick up steam before the last few months of 2002.

“The ‘recovery’ that we forecast will be weak and meandering for the first six months [of 2002],” says a report by the National Association of Manufacturers, the nation’s leading manufacturing trade group. Indeed, in a poll of the nation’s purchasing and supply executives, considered the best predictor of future trends in imports, roughly 60 percent in the U.S. manufacturing sector expected a decrease or no change in imports of materials during the first half of 2002. Within the manufacturing sector, some clothing and fabric purchasers are even more pessimistic, since a sizable percentage of their imports come from Pakistan and Indonesia, two countries that have experienced recent political instability. Even worse, 75 percent of purchasers in the non-manufacturing sector expected a decrease or no change in imports during the same time period.

In fact, some economists believe the recession could prompt America to drastically rethink its trade policies, a change that might forestall import penetration well past the winter of 2002. “During a recession, unemployed Americans may make the connection that some of these trade deals really haven’t been good for workers,” says Robert E. Scott, an international economist at the Economic Policy Institute, a research institution. “Before the recession, there was a strong, growing anti-trade movement, and the recession might lead people to join the movement and make leaders rethink plans for future trade deals.”

Already, some subtle signs of this rethink on trade have appeared. Despite President Bush’s popularity, in December his administration barely won a vote to grant the president fast track trade promotion authority in the House of Representatives. In addition, little progress has been made in the past year towards the Free Trade Area of the Americas, a Western Hemisphere free trade zone that undoubtedly would boost imports into the U.S.

Some Bright Spots

Yet not everyone is gloomy about the prospects for import penetration into the U.S. Some sectors, such as luxury goods and automobiles, will continue to do well despite the economic downturn, and some countries will see their exports to America increase throughout the recession. Many retail analysts believe luxury goods imports will be strong even before the last quarter of 2002, since most high-end consumers are barely affected by the economy’s cycles. Meanwhile, China’s trade surplus with the U.S. should grow in spite of the economic situation in America, since the Mainland is rapidly replacing other U.S. suppliers of semiconductors, computer hardware, and other higher-value goods.

What’s more, many economists believe several global factors will combine to create a strong rebound in U.S. imports in the last quarter of the year. The strong U.S. dollar, which has become a linchpin of American economic policy, will help foreign states’ export industries rebound to 2000 levels, since imports into the U.S. will remain relatively cheap. A reduction in global geopolitical uncertainty should lead American companies to start purchasing textiles, electronics components and other exports from countries such as Pakistan that were deemed too risky to be suppliers in late 2001. Having learned from the late-1990s financial crisis, many foreign states employed fiscal stimulus throughout late 2001, allowing their export-oriented industries to remain primed for a U.S. economic recovery.

For example, in late 2001 South Korea launched an emergency plan to inject two trillion won ($1.5 billion) into its economy, and Singapore, Malaysia, Japan, and the Philippines have all implemented similar measures.

Most importantly, the U.S. economy is expected to rebound strongly in late 2002 as American companies pare down their inventories and have to start purchasing in bulk once again, thereby boosting imports. NAM expects GDP growth of 3.5 percent during the second half of 2002, and other trade groups and economists project even higher numbers. Indeed, the same purchasing and supply executives who were so gloomy about the first half of 2001 were nearly exuberant about the end of the year: nearly 60 percent of the purchasers expected the imports situation in the second half of 2002 to be much improved over the first half.