International Trade Report 1st Quarter 2015

Tables and Graphs

Exports and Changing Markets

Tennessee's Largest Markets

Tennessee exports fell $258 million to $7.78 billion in the first quarter of the year. The 3.7 percent decline was the first quarterly loss since the 4th quarter of 2012, and the largest quarterly loss since the height of the global financial crisis in 2009. If it's any consolation, the state's decline was smaller than that for total American exports. They fell a bit more than 5 percent for the quarter.

The decline was broad-based. Five of the state's top six export commodities (at the four-digit HS level) lost ground for the quarter. Exports were similarly down to every major geographical region. While there were some idiosyncratic reasons, such as a sharp decline in auto sales to the Gulf states due to buying season and model changeovers, it's clear that the combination of a slow global economy and a rising dollar simply proved too much for Tennessee exporters, as it did for their American counterparts as well. The sharp loss of over $36 million in medical-related shipments to Japan is one example of the effect of the suddenly almighty dollar. The rare fall in global whiskey sales (from $153 million to $138 million) is another. We might also credit a good portion of the $50 million reduction in exports to Canada to the rising exchange rate.

Indeed, quarterly bright spots are rather difficult to locate if we set aside a rather fluky $66 million aircraft sale to Iraq in January. Exports to Europe were off $69 million, to South America $43 million, to the Gulf states $57 million, and to East Asia $76 million. They even fell $9 million in the NAFTA region, as a modest gain in Mexico wasn't enough to offset that $50 million Canadian loss. The fall was not uniform, of course, as state exporters forged gains in several countries, such as Korea, Germany, and the UK. But the broad trend was clear.

A pick-up in cotton exports accounts for the few areas where exports managed to rise. A massive increase in cotton exports to Vietnam joined a smaller gain in Indonesia to push foreign shipments to the ASEAN region into the black. It was also cotton that accounted for the quarter's best-performing market, Pakistan (if we exclude that single shipment to Iraq).

The automotive sector, the state's star performer for quite some time, finally stalled. Car and SUV sales dropped substantially, from $747 million to $626 million. (This figure, however, hides a very large increase in diesel car shipments.) The lion's share of this loss was in Saudi Arabia and the other Gulf states. Auto exports were more or less flat elsewhere in the world. On the flip side, auto parts exports continued to do relatively well. Parts exports listed under the motor vehicles parts export code (HS 8708) eked out a small gain for the quarter.

But one of the more frustrating features of tracking auto-related shipments is that they are actually spread over a sizable number of export codes, as products as varied as automotive glass, seats, air bags, engines, and so forth are placed under different codes. If we try to aggregate everything that goes into or on a car, Tennessee auto-related exports (excluding the cars and trucks themselves) appear to have grown about 7 percent for the quarter, to just above $1 billion. Looking at it that way, it wasn't such a bad quarter for much of the industry.

Regrettably, it's a lot harder to make a positive case for several other key state industries. The plastics industry lost about 10 percent of its foreign shipments (to $464 million). Germany, Korea, and China accounted for most of this decline. Manmade fibers and artificial filaments dropped even more, from $232 million to $169 million. These losses were concentrated in China. Aluminum plating may have fared worst of all, dropping by more than a third ($90 million) thanks to large declines in Mexico and in Saudi Arabia.

Aircraft-related exports gained about 10 percent, but that includes that large shipment to Iraq. Without it, they instead would have fallen nearly 10 percent. Medical exports, another sector that's spread over many codes, was pretty much a wash. Total sales were off about $14 million, a roughly 1 percent decline from the first quarter of 2014. Computer sales posted a very small gain (about $12 million) because a very large increase in laptop sales to Mexico was enough to counteract declines almost everywhere else.

Among smaller export sectors, two highlights were sales of lawn mowers and kraftliner. Exports of the latter increased from $47 to $64 million, with most of the gains coming in Mexico. Lawn mower shipments grew more than 77 percent ($71 million). The vast majority of these exports and their growth were to the Netherlands and Canada. Tennessee, by the way, exported more lawn mowing equipment than any other state during the first quarter. Agricultural exports were also generally strong, with soybeans (Costa Rica) and corn (Ecuador) joining cotton in posting gains. The only agricultural export that fared poorly was poultry, thanks to the growing global ban on imports from the U.S. as a result of the "avian flu" that is afflicting American chicken and turkey farms.

The marked slowdown in export growth in the third and fourth quarters of 2014 meant that 2015's poor numbers were not exactly a shock that came out of the blue. Once the huge growth in automotive exports that had powered state export growth in 2013 and early 2014 diminished, the underlying weakness across most other export sectors was exposed. There are simply too many headwinds. The dollar's climb was has been arrested for the past several months, and this may bring some relief. But what we really need is a more robust global economy, with growth returning to Europe and China shaking its recent doldrums. Until that happens, anemic growth is the most likely future for Tennessee exporters.