Dodging the Bullet … This Time: The Asian Crisis and U.S. Economic Growth during 1998

One of the great surprises of the U.S. economy this year has been its capacity to withstand the trade shocks resulting from the Asian financial crisis.

At the end of 1997, most economists were revising down their forecasts of U.S. output growth by 0.5-1.0 percentage point to adjust for the impact of the crisis on both imports and exports. As the United States sends about one-third of its exports to Asia and is the major market for the exports of Asian countries whose currencies have collapsed, the U.S. trade deficit had been widely expected to increase by about $50-60 billion this year. Concern about export losses was especially great on the U.S. west coast, which depends far more heavily on Asian trade than other regions. Worries about tourism also flourished. Las Vegas baccarat tables, for example, suffered a 25 percent slump because of the loss of high rollers from the overseas Chinese communities of Southeast Asia.