California’s merchandise export trade was nominally valued at $14.978 billion in the latest numbers (July 2024), a strong 6.7% gain over the $14.035 billion recorded in the same month one year earlier, according to a Beacon Economics’ analysis of official trade statistics released by the U.S. Census Bureau’s Foreign Trade Division.

U.S. exports meanwhile increased by 5.8% to $168.813 billion from $159.623 billion. As a result, California’s share of the nation’s merchandise export trade edged up to 8.9% % from 8.8% one year ago. In the pre-pandemic July of 2019, California’s share of the nation’s merchandise export trade was 10.2%.

Exports of California’s manufactured goods rose by 4.2% year-over-year to $9.399 billion from $9.021 billion. Meanwhile, the state’s exports of agricultural products and raw materials inched up 2.6% to $1.693 billion from $1.650 billion. Re-exports jumped by 15.5% to $3.996 billion from $3.364 billion in July 2023.�

California’s exports in the first seven months of 2024 amounted to $104.038 billion, a very slight 0.4% increase from the $103.596 billion in goods the state’s industries shipped abroad during the same period in 2023.

“As upbeat as July’s export numbers are, an industry that not long ago seemed to hold great promise for a state striving to electrify its transportation options continues to produce disappointing export numbers,” said Jock O’Connell, Beacon Economics’ International Trade Advisor. “July’s shipments abroad of electric vehicles from California were down 63.6% from a year ago.”�

California Imports Surge

The U.S. Commerce Department reports that California was the state-of-destination for 15.9% of all U.S. merchandise imports in July, with a value of $45.683 billion, a 25.0% increase over the $36.561 billion in imported goods in July 2023.

• Manufactured imports this July jumped by 49.0% to $40.557 billion from $32.588 billion one year earlier.
• Non-manufactured imports were valued at $5.126 billion, up 29.0% from the $3.973 billion in non-manufactured imports the state absorbed in July 2023. The sharp increases reflect the recent shift of commercial shipping to U.S. West Coast ports due to a threatened dockworker strike at ports from Texas to Maine and to the continued disruption of vessel traffic through the Red Sea.

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

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., May-July) with the corresponding period one year earlier. Please note that the numbers cited in this report are nominal values.

LEADING EXPORT COMMODITIES

The table below shows annual changes in California’s merchandise exports. In recent years, eleven commodity groups have posted three-month export totals exceeding $1 billion. Of those, eight recorded nominal year-over-year gains.

DESTINATIONS

Mexico is by far California’s leading export market. In the May-July period of 2024, shipments to our closest trading partner amounted to $8.536 billion, a gain of 1.8% over the $8.383 billion in merchandise California sent to Mexico during the same period last year.

• Canada held second place by importing $4.836 billion in goods from the state, down by 5.9% from $5.141 billion in the same period one year earlier.
• China took third place with by importing $3.976 billion in goods from California, a fall-off 5.2% from $4.194 billion a year earlier.
• In fourth place came Japan, whose imports from the Golden State rose by 4.2% to $2.791 billion from $2.677 billion.
• In fifth place was Taiwan, whose imports of California products were up by 13.6% to $2.440 billion from $2.147 billion.
• South Korea, which often vies to be included in the Top Five list, wound up in sixth place, posting an 11.8% decline in its California imports to $2.115 billion from $2.398 billion last year.

Eight other overseas markets recorded one billion dollars or more in imports from California in the last three months. They were the Netherlands ($1.736 billion, up from $1.550 billion one year earlier); Germany ($1.456 billion, down from $1.495 billion); Hong Kong ($1.416 billion, up from $1.395 billion; Malaysia ($1.491 billion, up from $739 million); India ($1.242 billion, down from $1.245 billion); Singapore ($1.238 billion, up from $1.047 billion; the United Kingdom ($1.108 billion, down from $1.122 billion); and Australia ($1.024 billion, up from $833 million).

In the latest three-month period, the state’s overall export trade with the economies of East Asia gained by 6.2% to reach $15.878 billion from $14.954 billion. California’s exports to the European Union meanwhile rose by 7.4% to $8.856 billion from $8.249 billion one year earlier. The state’s exports to Latin America and the Caribbean (excluding Mexico) increased by 4.1% to $2.353 billion from $2.261 billion. California’s shipments to the nations of Sub-Saharan Africa declined by 4.4% to $200 million from $209 million.

Mexico and Canada, America’s partners in the North American Free Trade Area, together accounted for 28.7% of California’s $46.543 billion merchandise export trade in the May to July period as the nominal value of shipments to our immediate neighbors declined by 1.1% to $13.372 billion from $13.523 billion.

MODE OF TRANSPORT

In the latest quarter, 49.3% of the state’s $46.543 billion merchandise export trade was shipped by air, while waterborne transport carried 24.2% of the outbound trade. The balance of the state’s exports largely travelled overland to Canada and Mexico.

THE PORTS

Trade through California ports has remained stable over the last five years, however, the mode by which goods are moved has shifted. Airports and Seaports continue to be the primary way goods are exported from California ports although exports have declined at Seaports (-6.8%) over the last five years. In contrast, exports through Land Ports have grown a substantial 44.2% over this period.

Imports through California ports are up 25.6% over the last five years. Seaports continue to account for the majority of imports through California, however those imports have only grown 18.2% over the last five years. Imports through California Airports (52.8%) and Land Ports (32.4%) have grown at a quicker pace during the same period.

• Total export trade at California ports from May 2024 to July 2024 was up 9.9% over the same period in 2023. Exports were up through Seaports (1.4%), Land Ports (9.0%), and Airports (18.2%) over the same period.
• Total import trade at California ports from May 2024 to July 2024 was up 14.7% over the same period last year. Imports were up through Airports (38.9%) and Seaports (10.7%), but down for Land Ports (-1.5%) over the same period.
• California ports accounted for 10.9% of exports from the United States from May 2024 to July 2024, up 0.6 percentage points over the same period one year ago.
• California ports accounted for 20.6% of imports to the United States from May 2024 to July 2024, up 1.9 percentage points over the same period one year ago.
• Container counts at the Port of Long Beach grew 52.6% from July 2023 to July 2024.
• Container counts at the Port of Los Angeles grew 37.3% from July 2023 to July 2024.

THE OUTLOOK

When thinking about future economic trends, it has become impossible to overlook the impact that climate (think rising global temperatures, a higher frequency of violent storms, rising sea levels, more irritable populations). Earlier this summer, Beacon Economics noted that June was the hottest month ever recorded in the Northern Hemisphere, with a predictable impact on economic activity and especially on agricultural production. July, it turns out, was even hotter. Then came August and headlines such as: “Australia sweats through hottest August on record with temperatures 3C above average,” “Spain registers hottest August on record,” “Swaths of China, Japan log record summer temperatures.”

Nearly everyone, it seems, was sweltering, searching out shade or air-conditioning. Electric distribution grids were stressed. California and Texas saw power demand hit all-time highs, raising questions – in California’s case – about the state’s ability to electrify its vast transportation system. Now that hurricane season has started along the East and Gulf Coasts, lower temperatures can be expected.

Also threatening the normal rhythms of international trade are the Houthi attacks on shipping in the Red Sea, which continue to deter maritime trade through the Suez Canal. It is unclear how long those attacks will persist. A group that has gained global prominence may be tempted to continue threatening shipping even after its stated goal – a resolution of the Gaza conflict – is reached. In effect, the Houthis may find it difficult to surrender the leverage in world affairs they have gained over the past several months. (At the same time, we cannot ignore simmering tensions on the opposite side of the Red Sea – in the Horn of Africa – as land-locked Ethiopia presses for access to the Rea Sea through territory claimed by Somalia. An outbreak of an armed conflict there could further endanger the vital shipping route through the Red Sea and Suez Canal.)

For traders on the U.S. West Coast, the impact of the rocket and drone attacks in the Red Sea has been to increase maritime traffic through ports from San Diego to Seattle. The prospect of a strike by the International Longshoremen’s Association has also driven higher levels of maritime commerce through West Coast ports. The union’s current contract expires on September 30. Importers and exporters are already hedging their bets that East and Gulf Coast ports may be closed for at least several days and are therefore diverting as much traffic to West Coast ports as is feasible. (The union that represents dockworkers at U.S. West Coast ports negotiated a new multi-year contract last year.) The benefit for California exporters is that a higher volume of container traffic generally means a greater availability of empty containers for shipments to markets around the globe at lower-than-normal shipping rates.

Overall, the outlook for the global economy remains upbeat. Although economic growth is generally expected to slow through the rest of this year and well into next year, only the usual crew of pessimists think a full-fledged recession is in the offing, at least in the United States (Europe is another matter).

In addition to Beacon Economics’ own optimistic forecast, the University of Michigan’s outlook sees real GDP growth in the United States averaging “about 2% annualized in the second half of 2024.” The Fed is also expected to cut interest rates later this month, a move that should stimulate a faster pace of economic growth here and abroad. Growth, in other words, that should lead to increased demand for internationally traded commodities.

Still, as buoyant as the forecast may be, you don’t have to look far for developments that could upset everyone’s apple cart.