Tennessee Trade Report 2nd Quarter 2019

Tables and Graphs

Largest Export Sectors

Most Rapidly Changing Exports

Most Rapidly Changing Markets

Tennessee's Largest Markets

It was another tough quarter for Tennessee exporters. The state’s foreign shipments fell to $7.5 billion for the quarter, a loss of $643 million from a year ago. This amounted to a 7.5 percent drop in exports from the second quarter of 2018. This placed Tennessee in 33rd place among the American states in its export performance. Nationally, exports were down a bit over three percent for the quarter.

State Exports Fell by $643 million

The losses involved three factors. First, the continuing slow growth of the world economy. Second, the impact of the U.S. “trade war” with China and other countries. And third, and particularly important for this state, declines in global automotive sales and production. If anyone needs a textbook case in the impact of tariffs on trade, check out Tennessee’s whiskey sales. A product that withstood the global recession of 2009 with little impact, lost more than a third of its sales last quarter because of tariffs imposed upon it by various countries around the world. The biggest losses were in its large European markets. Whiskey sales in France fell from $37 million to $13 million, in Germany from $16 million to $3 million, and in the UK from $13 million to $1 million. China, the epicenter of the trade wars, was a similar story. Tennessee’s sales to China were down by more than a quarter, a loss of nearly $200 million, about thirty percent of the state’s total quarterly loss. These were concentrated in agriculture, wood, and other primary products.

The Decline in Automotive Exports was Particularly Serious

For Tennessee, the slowdown in automotive sales was particularly serious. Though there were gains in some sectors, such as diesel engines, smaller commercial trucks, and electric batteries, these were the exceptions. Car engine exports, as well as parts for those engines, fell by more than a quarter. Autoparts shipments were down ten percent, and a variety of other automotive products, including transmission shafts, instruments, and piping, were down far more. Car sales themselves were off by $40 million (down to $669 million) as gains in SUV shipments were outweighed by losses among sedans and hybrids. In total, the automotive sector was down by around $200 million. The effects of the global slowdown can be seen across many regions. Tennessee’s exports to the EU dropped $100 million to $1.365 billion. Sales to Southeast Asia were flat because poor apparel sales decreased demand for the state’s cotton and polyesters. Falling motor vehicle sales led to losses in the Middle East, while only a dramatic increase in medical-related exports (to Argentina) prevented Latin America from also being in the red. Most disappointingly, shipments to both Canada and Mexico were also down. For both countries, the losses were concentrated in the automotive sector, again. Exports to Canada were off $120 million, while Mexico suffered an even larger $200 million decline.

The Big Exception was Medical Exports, which Grew More than Ten Percent

What prevented the second quarter from being truly bleak was the remarkable exception to all this bad news: a huge increase in medically-related exports almost all across the globe. Shipments of medical instruments rose more than ten percent (to $787 million) thanks to big gains in Argentina, as noted, but also Japan, China (!), Singapore, and Saudi Arabia. But the sales of artificial joints, pharmaceuticals, and medicaments were all also up by more than ten percent for the quarter. Together, these sectors produced a $200 million gain (to $1.3 billion). The steady expansion of Tennessee’s medical exports is exciting. It would be more so if this was not in the context of troubles in so many other sectors!

A Sudden Turn-Around is Not Likely

The second quarter was one where the bad news outweighed the good. There are not many omens that things are going to get better soon. Until at least one of three big headwinds we referenced at the start stops blowing, its reasonable expect more tough sailing over the next few quarters.