Even though the latest figures show some encouraging shrinkage in the U.S. trade deficit, Americans still have much hard work to do.

That conclusion may not be immediately apparent from this week's report out of Washington showing that the U.S. trade deficit shrank to $137.34 billion in 1988 - a 19.4 percent improvement, the first annual decline since 1980, and the lowest level in three years.But there are some worms in that shiny apple. Most of the improvement took place during the first half of 1988. Further progress in reducing the trade deficit could be slow because a healthy U.S. economy is still generating plenty of money to buy imports and Americans haven't lost their taste for foreign products. Moreover, the U.S. economy is running at close to full capacity, meaning it may not be able to keep up with the demand for exports from America.

Further reductions in the trade deficit, however, are imperative. This means the new Bush administration must keep exerting pressure to get other nations to reduce the artificial trade barriers that are keeping American products out of foreign markets.

It also means that Washington can't relax its efforts to eliminate the chronic big deficit in the federal budget. As long as the budget is in the red, America relies heavily on foreign investment and this impairs the U.S. trade performance.

One final point: The gains that have been made so far in reducing both the trade and budget deficits are the easiest ones. From now on, the going gets tougher.