Yeutter Sees Possible European, Japan Recession

U.S. Trade Representative Clayton Yeutter said a possible recession in western Europe or Japan was possible as a result of the U.S. dollar’s decline and the resulting drop in the U.S. trade deficit.

Yeutter told the Senate Finance Committee, “They certainly have the macroeconomic policy tools to adjust” to the U.S. reduction in imports.

Asked if the U.S. trade deficit was preventing them from going into a recession, Yeutter replied that result was “certainly possible” and was the reason why they should adjust their monetary, fiscal and tax policies.

Asked by Sen. Bill Bradley (D-N.J.) whether the U.S. trade deficit would improve more if the value of the dollar dropped further, Yeutter replied, “That should be a mathematical truism.” But he added that markets are more complicated than that.

He said he expected the current decline in the dollar to show up soon in the decline in the value of imports.

He expected the U.S. would soon start importing less from Japan and Europe and would start exporting more to Europe where there’s less rigidity on imports.