WASHINGTON, D.C.: The U.S. trade deficit surged to a record $48 billion for the July-September quarter as American exports fell for the first time in three years. Although the 19.3 percent rise in the deficit since the second quarter seems alarming, TIME's Bernard Baumohl says the worst may be over. "The U.S. is still importing a lot of goods from overseas because the economy is still strong," Baumohl reports. "Japan and Europe are in an economic slump and are not purchasing a lot of exports." Baumohl says the trend is close to shifting. "The trade deficit is expected to turn around next year when Japan's and Europe's economies begin to rebound," Baumohl says. "Hopefully we're at the worst point in the cycle right now." American trade deficits have risen every year under President Clinton despite his Administrationís efforts to make trade imbalance a key foreign policy priority. Two other factors contributing to the trade deficit are the continued strength of the dollar (which makes U.S. exports more expensive overseas and imports cheaper in the U.S.) and the problem of closed markets abroad. "There is a potential political as well as trade problem down the line with countries like China," Baumohl reports. "The numbers indicate that the U.S. has a bigger trade imbalance with China than Japan. The U.S. will have to confront China soon on the tricky issue of opening markets to our goods."