Wisconsin companies exported $20.5 billion in goods in 2020, a 5.4% drop from the prior year and the lowest annual total since 2010.
Exports were trending toward a more than 7% decline through November but closed the year with a 14% increase in December. Still, exports were down more than $1.16 billion from 2019 and more than $2.21 billion from 2018 levels.
Wisconsin exports to Canada, the top destination for the state’s products, decreased 7.8% in 2020. Other top destinations also saw declines including 22% to Mexico and 5% to Europe.
Most of the overall decrease in 2020 came in April, May and June as the COVID-19 pandemic dramatically slowed economic activity. In the second half of 2020, exports were actually up by around $78 million or 0.7%, largely thanks to the strong December numbers.
December’s strength was driven by a $44 million increase in exported aircraft parts, a nearly $33 million increase in exports of soybeans, a more than $29 million increase in plastics, $24 million increase in pharmaceutical products and a nearly $39 million increase across a variety machinery categories.
More than $55 million in aircraft parts went to Austria in December, more than accounting for the increase worldwide. Similarly, exports of soybeans to five countries – Portugal, Egypt, Spain, Mexico and Indonesia – accounted for more than the total increase in December exports. Soybean exports to Portugal alone saw a nearly $11 million increase in December.
Soybean exports from Wisconsin to China totaled $2.9 million for the year, with nearly half that total coming in December. Soybeans were among the crops China pledged to buy more of from the U.S. under a trade deal with then-President Donald Trump.
Last year’s total was an improvement from no exports to China in 2019, but it remained below the $3.5 million total in 2018 and nearly $7.2 million in 2017. Nationally, soybean exports were ahead of 2017 levels by around $2 billion.
Benjamin Jurken, vice president of Milwaukee-based supply chain consultancy The ABC Group, said China missed on its agricultural targets from the deal by about 50% last year. While COVID likely played a role in missing the targets this year, it is unlikely China would be increasing purchases going forward.
“They’re going to purchase what they need and probably not more than that,” Jurken said.
On the import side, Jurken said the outlook is “fairly strong,” adding that consumer goods remained strong throughout 2020 with some of The ABC Group’s clients experiencing record growth. He noted that the trend was driven by many consumers having discretionary income with no ability to spend it on experiences.
Similar to exports, imports to Wisconsin ended the year down 5.6% but did not see quite as dramatic of a decline as the COVID-19 pandemic hit. Imports also saw a slightly strong end to the year with 15% increases in both November and December. Combined, those two months amounted to a $678 million increase in imports compared to 2019.
Imports from China specifically were down 13% for the year while imports from all of Asia were down around 4.4%.
Jurken said The ABC Group has seen “strong interest” from companies looking to move their supply chains out of China. The trend is not likely to change as President Joe Biden’s administration has not moved to quickly remove tariffs Trump put in place. There is also potential for relations between the U.S. and China to continue to sour if the Biden administration pushes for more structural reforms on social issues compared to the more transactional approach taken by Trump.
Trump’s tariffs appear to have generally pushed supply chains to other countries. One of the initial big winners has been Vietnam, which Wisconsin imported $1.26 billion in goods from last year, a nearly 22% increase.
Jurken said Vietnam is often the first stop for companies looking to move their supply chains and the country is a good option for select industries like apparel or cut and sew operations. In other sectors like automotive or more traditional manufacturing, it will be hard for a single market to replace China, he said.
One possibility The ABC Group is expecting over a more medium term is for India to emerge as a potential single-source market alternative to China. Imports from India were down nearly 12% last year and were at their lowest level since 2016.
Companies are looking at nearshoring some production, Jurken said, adding that high-labor industries are unlikely to return domestically because of costs. He said Mexico is seen as an alternative, particularly for assembly operations, but companies used to doing business in Asia are finding it challenging to deal with a slower moving business culture.