California’s merchandise export trade resumed its growth trajectory in October, according to a recent trade report by Beacon Economics.
Growth posted a nominal 3.8% gain over the same month one year earlier.
According to the Beacon report, foreign shipments by California businesses totaled $15.21 billion in the latest numbers, a healthy increase over the $14.66 billion recorded in October 2015. The price of exports continues to fall driven by a stronger dollar and low overall inflation. This implies that the real volume of exported products grew at close to a 5% pace—the best in several years.
While the state’s exports of manufactured goods in October fell by a nominal (nonprice adjusted) 1.7% to $9.30 billion from $9.46 billion one year earlier, exports of nonmanufactured goods (chiefly agricultural products and raw materials) soared 24.7%, to $2.32 billion from $1.86 billion. Re-exports, meanwhile, rose 6.2% to $3.59 billion from $3.38 billion. By way of comparison, the nominal value of overall U.S. merchandise exports in October slipped by 1.4%, while exports from Texas fell 3.8% from last October, the report states.
October’s export gains were reflected in an increased volume of traffic at the state’s principal international trade gateways. The number of outbound loaded containers sailing from the ports of Los Angeles, Long Beach and Oakland was up 13.4% from October 2015. The state’s two primary international aviation gateways – Los Angeles International and San Francisco International – saw a combined 9.7% increase in airborne export tonnage in October.
The U.S. Department of Commerce has determined that California was the state-of-destination for 18.5% of all U.S. merchandise imports in October, with a value of $37.76 billion, up 2.6% from the $36.79 billion in imported goods in October 2015. Manufactured imports totaled $34.87 billion, an increase of 2.7% from $33.95 billion last year. Nonmanufactured imports in October were valued at $2.89 billion, 1.8% over the $2.84 billion recorded a year ago.
A Closer Look At The Numbers
As always, Beacon Economics cautions against reading too much into month-to-month fluctuations in state export statistics, especially when focusing on specific commodities or destinations. Significant variations may occur as the result of unusual developments or exceptional one-off trades and may not be indicative of underlying trends. For that reason, Beacon Economics compares the latest three months for which data are available (i.e., August-October) with the corresponding period one year earlier.
On the plus side of the ledger, exports of computer and electronic products (computers and peripherals; communication, audio, and video equipment; navigational controls; and electro-medical instruments) edged up just 0.1% to $11.14 billion from $11.12 billion. The state’s exports of transportation equipment (automobiles, trucks, trains, boats, airplanes, and their parts) rose 3.9% to $5.13 billion from $4.94 billion. Exports of miscellaneous manufactured commodities (a catchall category of merchandise ranging from medical equipment to sporting goods) jumped 10.7% to $3.61 billion from $3.26 billion.
Exports of nonelectrical machinery (machinery for industrial, agricultural and construction uses, as well as ventilation, heating, and air conditioning equipment) slipped 2.2% to $3.63 billion from $3.71 billion. Chemical exports (including pesticides and fertilizers; pharmaceutical products; paints and adhesives; soap and cleaning products; and raw plastics, resins, and rubber) fell 1.5% to $3.40 billion from $3.46 billion.
Agricultural exports gained 10% to $3.63 billion from $3.3 billion, while foreign shipments of food and kindred goods remained essentially unchanged at 2.24 billion.
Mexico maintained its status as California’s single largest export destination during the latest three-month period. The value of the state’s shipments south of the border was unchanged at $6.83 billion. Exports to Canada remain disappointing, slipping 2.8% to $4.22 billion from $4.34 billion, while shipments to China were off by 0.5% to $3.69 billion from $3.71 billion. Exports to Japan strengthened, rising by 12.5% to $3.18 billion from $2.83 billion. Hong Kong, up 4.5% to $2.85 billion from $2.73 billion, rounded out the list of California’s top five export markets. In light of recent developments, Beacon Economics notes that California exports to Taiwan in the latest three-month period were off by 36.4% to $1.66 billion from $2.61 billion on year ago.
By mode of transport, 46.3% of the state’s $42.99 billion merchandise export trade during the most recent three months went by air, while waterborne transport carried 30.01%. The balance traveled overland to Canada and Mexico.
Beacon Institute experts are concerned by the prospect of a major trade war, commenting that President-elect Donald Trump has “double-downed on his anti-Chinese rhetoric in recent days, while also raising the specter of substantial tariffs on goods imported from Mexico. Neither would be beneficial to California’s economic interests.”
Many believe that a wall of tariffs will lead to a renaissance for employment in the nation’s manufacturing industries, but there is no real evidence to support that view. Manufacturing enterprises not only in the United States but around the world are fundamentally in the business of reducing their dependence on a human workforce. The jobs that might be created from the repatriation of manufacturing capacity are unlikely to be filled by unskilled workers.
For most clothing, footwear, furniture, and other household necessities, a high tariff on imports from China will cause retail prices to soar. For many, if not most, of these items, there are no domestically produced substitutes available, meaning that some form of government-enforced rationing may be needed to ensure a measure of market equity.
Similarly, U.S. supply chains are heavily integrated with global producers. Large tariffs on such inputs would cause major disruptions in manufacturing sectors that are doing very well in the United States at the moment—including automobiles, transportation, and of course high tech products.
Staff Contact: Susanne T. Stirling