The problem is that the U.S. deficit is maintained by borrowing. "It can't be sustained in the long term because at some point foreign lenders will expect higher interest rates to keep on financing it," says Baumohl. "That would mean a slowdown of the U.S. economy." Unless Asia begins to recover, rising deficits will also amplify calls for protectionism in the U.S. And that, says Baumohl, "would set the world economy on the path toward another global depression."
The U.S. economy can take the pain, but not forever. The Commerce Department Wednesday announced an 8.1 percent surge in the nation's third-quarter trade deficit, to a record $61.3 billion -- a direct result of the Asian crisis that has left imports even cheaper while drying up the market for U.S. exports. "The booming trade deficit hurts the U.S. economy, but we have no alternative," says TIME senior business writer Bernard Baumohl. "The only way we can help Asia, and the world economy, rebound is to keep on importing their goods."