Tennessee Trade Report 1st Quarter 2019

Tables and Graphs

Largest Export Sectors

Most Rapidly Changing Exports

Most Rapidly Changing Markets

Tennessee's Largest Markets

State exporters were able to squeeze out a $6 million increase in foreign shipments this past quarter. The quarter’s exports were valued at $7.955 billion, a gain of less than one percent from a year earlier. In this respect Tennessee was typical; overall American exports grew only 1.28 percent. The state in fact ranked 23rd among all U.S. states in its performance.

The state ranked 23rd among all U.S. states

The overall change was tiny, but this hides a lot of churn. Several sectors posted very robust growth, notably medical-related exports and almost all chemicals. In addition, the reopening of Tennessee’s remaining silicon plant led to a $48 million gain in exports of that product. Transportation, on the other hand, whether automotive or aviation, posted some very poor numbers. So also did wood products and whiskey, two products caught up in the trade war.

Medical instruments, pharmaceuticals, surgical catgut, blood, and orthopedics were among the medical-related products that had a very good quarter. Combined, these listed products increased their exports by almost $300 million for the quarter. This growth was worldwide. Australia, Argentina, Saudi Arabia, Japan, and Canada were among the markets ramping up their shipments of medical goods from Tennessee. Really only Europe was a holdout from this trend.

Simple math tells us that if medical exports gained that much, then something else must have been hurting. The “something elses” were mostly in the transportation sector. Aircraft exports fell by $58 million (to $311 million). SUV sales were up, but car sales dropped steeply. As a result, total motor vehicle shipments were down by $83 million. These losses were mostly in Canada and the Gulf nations of the Middle East. Other automotive-related shipments were similarly down. Products ranging from auto engines (from $132 in the first quarter of 2018 to $38 this past quarter) to steering wheels ($61 million to $27 million) and transmission shafts ($25 million to $12 million) were among them. The big exception was aluminum plating, a product primarily used in automobile stamping. Its shipments soared from $9 million to $94 million, with almost all of it going to Mexico or Canada. One oddity of the quarter was a healthy increase in motor vehicle exports going to Russia, of all places. (Russia itself was one of the state’s best markets this past quarter, with Tennessee shipments up 75 percent.)

A couple of usually strong products remain caught up in the trade wars. Wood exports, which in past years have mostly been going to China, dropped by $26 million last quarter. Whiskey, under retaliatory tariffs from many countries, saw its sales plummet by nearly half, a loss of $45 million. The whiskey losses were mostly in Europe, with Germany and Italy being particularly tough markets under the new tariffs.

The effects of the trade war can be seen

The effects of the trade war can certainly be seen in exports to China—off by 15 percent last quarter. This was a loss of $92 million in exports. Though the medical sector was still able to post gains in China, nearly everybody else saw a more difficult market. The European market, where a number of retaliatory tariffs are in place, was essentially flat.

Both NAFTA partners saw declines

Both NAFTA partners saw declines in their imports from Tennessee. Shipments to Canada were off by $110 million, about a five percent drop. This was mostly due to falls in various automotive products. Shipments to Mexico were also down, though only slightly (they were off $7 million).

Elsewhere, South America has been a pretty tough market for the past several quarters, and that did not change. State exports to this region fell by six percent. The two biggest markets, Argentina and Brazil, saw little change, but both Chile and Colombia purchased substantially fewer Tennessee goods this past quarter. Asia, China aside, was better. State exporters increased their shipments to Southeast Asia by about five percent, to Japan by almost 14 percent, and to Korea by 15 percent. The growth in Japan was heavily concentrated in medical goods. The best of the large markets turned out to be Australia, where Tennessee exports climbed over $200 million for the quarter (a 56 percent increase).

A sudden turnaround is unlikely

Given the headwinds being experienced in the global economy, the impact of the trade wars, and the flat market for automobiles in the U.S. and Canada (sales were down about one percent over the first quarter), it may not be reasonable to expect a sudden turnaround in Tennessee’s foreign shipments. It appears that exporters are going to have to slog it out for a whie until, we hope, one or more of these headwinds abates.