Welcome to the California Trade Report, Beacon Economics’ monthly analysis of California’s international trade activity. This report analyzes data released by the U.S. Census Bureau’s Foreign Trade Division and pinpoints important trends in the state’s import/export industry, identifying potential effects on the state’s economy. The report is only a sampling of the kind of economic research and data analysis available from Beacon Economics.
Global Fuel, Transportation Costs Continue To Rise Amid Iran War
OVERVIEW
CALIFORNIA IMPORTS
A CLOSER LOOK AT THE NUMBERS
LEADING EXPORT COMMODITIES
DESTINATIONS
MODE OF TRANSPORT
THE OUTLOOK
OVERVIEW
California’s merchandise export trade in February was valued at $15.265 billion, according to Beacon Economics’ analysis of new statistics released today by the U.S. Census Bureau’s Foreign Trade Division. That represented a 3.1% gain over the $14.799 billion in exports the state recorded in the second month of 2025.
Over the same period, however, overall U.S. exports increased at a much faster 16.4% pace to reach $195.138 billion from $167.609 billion one year earlier. As a result, California’s share of the nation’s merchandise export trade dropped to 7.8% from 8.8% one year earlier.
Exports of California’s manufactured products in February inched up with a nominal gain of 1.1% to $9.220 billion from $9.117 billion. Meanwhile, the state’s shipments abroad of non-manufactured commodities jumped by 19.3% to $2.136 billion from $1.791 billion. Re-exports edged up by 0.5% to $3.909 billion from $3.891 billion in February 2025.
“There are two very notable things about the latest foreign trade numbers,” said Jock O’Connell, Beacon Economics’ International Trade Advisor. “First, China has now dropped to sixth place among California’s largest export markets, trailing Mexico, Canada, Japan, Taiwan, and South Korea. And secondly, shipments abroad from the state’s agricultural sector now exceed the value of transportation industry exports.”
CALIFORNIA IMPORTS
California led all other states in merchandise imports in February.
The U.S. Commerce Department reports that California was again the nation’s leading state-of-destination for imported goods. Even so, its edge over Texas continues to shrink. This February, California’s 16.4% share of all U.S. merchandise imports was valued at $35.332 billion, a 0.3% decline from the $35.451 billion imported into the state in February 2025. Texas, meanwhile, accounted for 13.4% of America’s merchandise import trade in this year’s second month, up from a 10.8% share one year earlier.
Manufactured imports in February nudged up by 1.4% to $31.768 billion from $31.319 billion one year earlier.
Non-manufactured imports in February were valued at $3.565 billion, down by 13.7% from the $4.132 billion in non-manufactured goods the state imported in February 2025.
Please note that Beacon Economics has long taken a skeptical view of the federal government’s state-of-destination statistics. The data’s fundamental shortcoming is that they capture not just goods consumed by California residents or used by California businesses but also a sizable quantity of imported merchandise that is offloaded at California ports but is bound for markets elsewhere in the country.
A CLOSER LOOK AT THE NUMBERS
A CLOSER LOOK AT THE NUMBERS
As always, Beacon Economics advises against reading too much into month-to-month fluctuations in state export statistics, especially when focusing on specific commodities or destinations. Significant variations can occur due to 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., December – February) with the corresponding period one year earlier. Please note that the numbers cited in this report are nominal values.
LEADING EXPORT COMMODITIES
LEADING EXPORT COMMODITIES
The table below displays the latest year-over-year changes in California’s merchandise export trade during the latest three-month period. Twelve commodity groups posted three-month export totals exceeding $1 billion.
DESTINATIONS
DESTINATIONS
Thirteen foreign markets recorded one billion dollars or more in shipments from California in the last three months. Not surprisingly, trade policy discords helped push shipments to Mexico and Canada down by 10.3% from the same period one year earlier. China also continued its precipitous decline as an export destination for California merchandise as Taiwan, Japan, and South Korea all claimed larger shares of California’s export trade. The Netherlands and Germany also ranked among the Top Ten export destinations for California exports.
Honorable mention should go to Turkey, which more than doubled its imports from California in the last three months to $995 million from $461 million.
In the last three months, California’s merchandise export trade with the economies of East Asia inched down by 0.5% as the value of shipments across the Pacific totaled $14.384 billion, falling from $14.459 billion one year earlier. Meanwhile, California’s exports to the European Union and the United Kingdom jumped by 9.9% to $9.387 billion from $8.544 billion. The state’s exports to Latin America and the Caribbean (excluding Mexico) rose 0.9% to $2.277 billion from $2.257 billion.
Mexico and Canada, America’s partners in the Canada-Mexico-US Free Trade Area, combined to account for 25.2% of California’s $45.324 billion merchandise export trade in the last three months, down from their 28.4% share one year earlier.
MODE OF TRANSPORT
MODE OF TRANSPORT
Over half (51.6%) of California’s merchandise export trade in last three months was shipped by air, while waterborne transport accounted for 25.7% of the state’s outbound overseas trade. The balance of the state’s exports largely travelled overland to Canada and Mexico.
THE OUTLOOK
THE OUTLOOK
Far from subsiding after a month of pounding by American and Israeli arms, the war in the Middle East has spilled over into the Red Sea as Iran has lately been joined by its Houthi allies in Yemen. Maritime trade through the Gulf of Hormuz is minimal, limited essentially to ships operated by the few countries lending support to Iran. Maritime trade through the southern approaches to the Suez Canal are at heightened risk.
Globally, fuel costs remain high, and, since diesel fuels all supply chains, transportation costs have shot up. The benchmark West Texas Intermediate price for a barrel of crude oil jumped to over $110 earlier today (it has been higher – the peak was over $145 in July 2008). Individual motorists can save on gasoline by curtailing their driving, but commercial truckers are expected to make their pick-ups and deliveries.
Diesel, as we have repeatedly emphasized, fuels all supply chains, on land, at sea, and in the air. Trucking lines, railways, ocean carriers, and airlines can finesse higher fuel costs for only so long. Persistently higher bills for transportation fuels such as might result from a prolonged standoff in the Middle East are inherently inflationary. Unfortunately, there is no real clarity on resolving the conflict on this front.
There remains the matter of tariffs. A new study from the University of California indicates that California’s agricultural exports to China last year fell by a stunning 64%. The state’s top 13 farm commodities plunged from $1.55 billion to $554 million as China retaliated against U.S. tariffs with its own tariffs targeting politically sensitive American exports and by otherwise discouraging the purchasing of U.S. goods. Apart from the immediate impact on farmers’ export revenues, there is a larger danger that exporters of specialty crops in California and other western states could find that China, the second largest economy in the world, has moved on and found alternate suppliers.
This is not a phenomenon limited to China or even to agricultural commodities. Those who spend a fair amount of their time travelling abroad to nurture existing markets and cultivate new customers are becoming painfully aware that America’s popularity has been waning dramatically. Especially at risk is our reputation as a steady, reliable business partner. As we have seen in recent months, our principal trading partners have been feverishly pursuing new trading alliances that circumvent dependence on the United States.
Still, the Trump administration is not shying away from imposing new sets of tariffs to replace those recently deemed unconstitutional by the U.S. Supreme Court. Whether or not importers will receive anything resembling full rebates on the tariffs that had been illegally charged is still an open question. What is much more certain is that more tariffs will be levied under new legal authorities and that these tariffs will elicit counter measures from aggrieved trading partners.
If you’e looking for a more comforting conclusion to this outlook, elsewhere in this month’s report is the revelation that Agricultural Produce has replaced Transportation Equipment such as aircraft components, rocket parts, and Teslas as California’s number two export commodity, trailing only Computers and Electronic Products. That seems entirely consistent with a new report in the Wine-Searcher newsletter: “California produces about half of the fruits and vegetables grown in the U.S., and if it were a country, it would be the fifth-largest agricultural producer in the world.”
Note: The U.S. Commerce Department has been publishing state-of-destination import statistics since 2008. Beacon Economics has long felt that state import data provide a highly misleading indication of the state in which imported goods were ultimately consumed. As a major gateway for the nation’s foreign trade, California has consistently been credited with an out-sized share of U.S. merchandise imports. However, we now believe that the process by which state-of-destination import statistics are compiled has become stable enough to be used to measure relative increases or decreases in the value of imported goods consumed or otherwise used by residents or businesses located in California. We strongly emphasize that we are solely interested in identifying trends. We continue to believe it is not useful to use state export and import statistics to calculate a state trade balance.
Need forecast data?
Beacon Economics provides customized five-year data forecasts for variables including:
