Tennessee Trade Report 2nd Quarter 2020

Tables and Graphs

Tennessee's Largest Export Industries

Tennessee's Largest Markets

Tennessee's Most Rapidly Changing Exports

Tennessee's Most Rapidly Changing Markets

No surprise – it was a dreadful quarter for Tennessee exports.  Second quarter exports dropped about thirty percent from those of the 2nd quarter 2019.  That’s a loss of some $2.5 billion (from $7.9 to $5.5 billion).  This was roughly in line with the performance of the United States as a whole. Tennessee ranked as 17th “best” among all U.S. states for the quarter. (Only two states, Nevada and Alaska, actually increased their exports.)

The Auto Suffered Particularly Badly

The losses were almost across the board, but the auto industry suffered particularly badly. Car and truck shipments dropped from $604 million to only $59 million for the quarter. That stunning collapse was mirrored elsewhere in the industry. Motor vehicle parts exports fell more than $200 million, and aluminum plating, tires, engines, and fabricated metals used in cars all sustained huge losses.

But cars were not alone.  Computer related exports fell close to fifty percent. Industries such as plastics, fabrics, electrical instruments, pharmaceuticals, and cotton were all hit hard. We’ve summarized the allocation of the state’s losses by sector in the accompanying table.

Sector $ Loss (Millions) % Quarterly Loss
Motor Vehicles     $545    31.9%
Auto Parts     $246    14.4%
Vehicle Engines     $105      6.1%
Computer Equipment     $ 93      5.4%
Elec. Equipment     $ 61      3.5%

Which Industries Held Their Own?

Maybe the better question to ask is which industries actually held their own?  A few actually did.  The largest was the medical equipment sector.  Depending upon exactly how you define it, it held steady or even grew a bit to $535 million for the quarter. This made it by far the state’s leading export industry. Aircraft exports were up a bit too.  Basic chemicals held their own, and mobile phone equipment even posted a seven percent gain (to $163 million) making it the star for the quarter.

Canada and Mexico Posted Huge Losses

Geographically, as we might expect, Tennessee’s worst export destinations were those concentrated in motor vehicles.  Canada and Mexico each posted huge losses.  Shipments to Canada fell from $1.7 billion to $941 million. Cars and parts accounted for the lion’s share of this, but Canada is also where a lot of the computer industry’s decline occurred.  Shipments to Mexico were down by half (to $522 million) with diesel engines and various vehicle parts accounting for most of the fall.

Latin American exports were down about a third.  Here there was a double whammy as Argentina’s debt problems combined with covid-19 to produce a nearly $100 million drop in exports ($112 million to $23 million). That was the worst. Brazil, Chile, and Colombia were all down ten to twenty percent, with pharmaceuticals posting sizable declines across all three.  The Mid-East is, for Tennessee, basically an automotive market. And, yes, exports to Saudi Arabia, the United Arab Emirates, and Oman collapsed.

Asia was Down, with the Exception of China

East and Southeast Asia continue the theme, with one big, surprising exception: China. The state’s exports to China grew nearly $100 million for the second quarter, pushing it ahead of Mexico as Tennessee’s second largest market. The story here was medicine: a huge increase in medical instrument shipments as well as orthopedics.  But even cotton exports were up, suggesting that normal economic activity is resuming in that country. Medical products were also up in Japan, but they were outweighed by big losses in the automotive sector. Exports to Japan ended up $75 million less than a year ago. The near stoppage of auto exports also led to a big decline in South Korea ($214 to $154 million.) The situation in Southeast Asia was broadly similar, with shipments to Singapore down from $321 million to $259 million.  The sole exception was the Philippines.  It shares cell phone industry supply chain linkages with Tennessee firms, the one industry that actually had a decent quarter.  Exports to the Philippines wound up $24 million higher than the second quarter of 2019.

Europe Held Up Better than Other Regions

Europe held up better than any other region.  Tennessee exports there fell a relatively modest six percent, to $1.075 billion.  Exports to Germany rose, thanks to medical instruments, silicon, and precious metal scrap. Belgium, however, was down about ten percent and the Netherlands off twenty percent.  The worst major European market for Tennesseans, by far, was the U.K.  Shipments to Britain fell by nearly $200 million. The vast majority of this loss was due to declines in aircraft and in electric auto batteries.

...the Export Losses Were Surprisingly Concentrated

We were not expecting much good news, and sure enough, we didn’t get much.  But it’s interesting to note that the largest losses were concentrated in several industries, notably the automotive, and that several other industries, including chemicals and medical instruments, performed relatively well, all things considered.  Obviously the big covid-19 impacts are not being felt evenly across the economy.

Evidently, we can’t expect the picture to change much until the coronavirus is under control. At the point the question will become, how fast can Tennessee exporters recover their old markets?