The nation's trade deficit is on the rise, triggering fears that the impact of Asia's recent financial turmoil has begun washing ashore here.

If the trend continues, as expected by most, the economy's growth next year could be undercut. Moreover, political arguments over free trade are likely to be sharpened.

In September, the nation imported $11.1 billion more goods and services than it exported. The biggest reason was the exploding trade gap with Japan, China, and other Asian nations.

Currency and banking crises have recently struck a host of Asian nations, most notably Japan and South Korea.

The September trade report surprised and disappointed economists because the gap has grown without regard for a robust U.S. economy.

"Despite the solid export performance, the outlook for U.S. trade is deteriorating," said economists Joseph Liro and Anita Ash of CIBC Oppenheimer Corp.

"Even an exceptionally competitive manufacturing sector characterized by strong productivity gains and declining unit labor costs cannot indefinitely buck the combination of weakness in so many trading partners and the rising exchange value of the dollar," they said.

"Its going to get worse, absolutely," said Edward Yardeni, chief economist at Deutsche Morgan Grenfell Inc. He noted that 70% of the U.S. deficit is accounted for by what he calls the "Asian crisis group."

The group comprises Japan, China, Hong Kong, South Korea, Singapore, Taiwan, Indonesia, Malaysia, the Philippines, and Thailand.

"Our export growth is going to slow to that part of the world, and we are talking about 25% of our exports," Mr. Yardeni said. At the same time, 40% of U.S. imports come from Asia, "and that is going to rise," he said.

The Asian trend is the biggest reason Mr. Yardeni recently slashed his forecast for 1998 economic growth in the U.S. to 2% from 3%. His special concern is that deflationary forces at work in Asia will put pressure on corporate earnings.

"This is going to have a big impact on pricing for just about everything," he said. "I think 1998 could turn out to be a tougher year for pricing than 1997, which has been no picnic. That could be a real problem for profits, which in turn could be a problem for capital spending and even employment."

In fact, U.S. import prices have been falling steadily. Excluding petroleum products, they slipped 0.3% in October, the fourth consecutive month of declines, the Labor Department said last week.

The drop was fueled by lower prices for imported capital goods, which continued a two-year decline by dropping 0.8% for the month. Prices for nonpetroleum imports have fallen in 10 of the past 12 months and were down 2.3% for the year ended in October, according to the government report.

Overall, import prices rose 0.1% for the month because of a 5.0% jump in imported petroleum prices. But despite the October rise, petroleum prices remain down 17.2% for the year ended in October, Labor said.

Import prices are down 3.8% over the past 12 months. Led by ongoing decline in computer prices, the index for capital goods has fallen 7.1% during the past year, following a drop of 2.8% during the previous 12-month period.

Import prices from Japan fell 0.6% in October, attributable in part to the falling value of the yen. Prices for imports from the Asian Newly Industrialized Countries were unchanged in October after falling 0.8% the previous month. Imports from the European Union rose 0.4%, following a 0.6% decline in September.

Meanwhile, the Labor Department said U.S. export prices declined 0.3% in October, the seventh consecutive month that these prices were either down or unchanged.

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