Cross-Border Trade Through Nogales Port 2020: Shifting Sands of This Pandemic Year

As we have just acknowledged the first anniversary of the COVID-19 pandemic and have entered the second year, there has been no shortage of facts confirming that every corner of the economy has been profoundly impacted by unprecedented restrictions on production, services, and movement of people and goods.  There are few places where those constraints have played out in a full sight more noticeably than at the border ports of entry.

Nogales border port of entry has long served as Arizona’s major gateway for trade with Mexico and is currently one of six major ports for all U.S.- Mexico trade. How deep have been the dips in cross-border trade caused by the pandemic, and have exports and imports been affected in the same way? While the primary concern is the depth of the decline in trade and the impact on principal commodities, it will also be interesting to investigate whether any shifts have occurred in the composition of traded commodities. And to better assess Nogales’ situation, we will compare 2020 cross-border flows of commodities to other major southern border ports of entry including Laredo, Hidalgo, and El Paso in Texas; Otay Mesa in California, and Santa Teresa in New Mexico.

Substantial Decline, but Not the Worst Yet

The year 2019 will indeed be a year to remember as it will be some time before the national and global trade stabilizes and expands above past levels. In 2019, the total U.S.-Mexico trade through the Nogales port reached a high $25.5 billion worth of goods shipped to and from Mexico. This made the Nogales port the sixth largest among the southern border ports.  By the end of 2020, the value of traded commodities through the port declined 14.2%, the second deepest decline in the last eighteen years surpassed only by the 2009 decline of 15.1% caused by the Great Recession, as shown in Figure 1.

Figure 1. US Trade through the Nogales Port, 2003-2020

In comparison with other major southern ports of entry, shown in Figure 2, Nogales’ drop in cross-border trade of 14.2%, although deep and painful, was not the worst. At Santa Teresa, a New Mexico port, trade declined 16.6%, while El Paso, the second largest port in Texas, experienced the most drastic decline of 61.7%. At the same time, the trade through the largest southern port, Laredo in Texas, declined 11.4%, followed by Hidalgo, also in Texas, by 13.8%, while the largest California port, Otay Mesa, recorded the smallest decile of 6.7%.

Figure 2. US Trade through Major Southern Ports 2020

Exports Were Impacted More Than Imports

The U.S. exports through Nogales port in 2020 declined 18.5% percent, substantially more than decline in imported value of 11.2%. As shown in Figure 3, all other major ports experienced similar differences between exported and imported volumes (measured in dollar terms) with the exception of El Paso where imports shrunk almost 70% from the year ago. These differences in a large part reflect different composition of commodities shipped through each port. For example, nuclear reactors, boilers and machinery play much larger role in exports through El Paso and Santa Teresa than through Nogales, and this particular commodity group took especially hard hit with more than 50% decline at both ports.

Figure 3. US Exports and Imports through Major Southern Ports 2020

Exports of All Top Commodities Declined In 2020

In 2019, at the Nogales port, two commodity groups[1] dominated U.S. exports to Mexico: electric machinery (HS 85) and ores (HS 26), the latter primarily consisting of copper ore mined in Arizona. The trade value of these two commodities was more than $4. 1 billion, which accounted for more than 40 percent of the total exported value.  The next three commodity groups topping the list were nuclear reactors, boilers, and parts (HS 84), plastics (HS 39), and vehicles and parts (HS 87). Together these five commodity categories accounted for 63.8% of all exported merchandise value in 2019, but at the end of 2020, accounted for a larger share of total dollars lost, i.e., 69.7% of the total loss of $1.9 billion. Table 1 lists the top exported commodities by dollar value (ranked in 2019) and their losses in 2020 expressed in both dollar value and as a percentage from year ago.

Table 1. Top US Exports to Mexico through Nogales Port in 2020

Figure 4 shows the same top exported commodities ranked by the depth of the loss. The most severely impacted exports were aircraft and parts (HS 88) with 45.4% drop, followed by iron and steel (HS 72) with a decline of 41.4%, rubber products (HS 40) with a decline of 35.5%, copper products (HS 74) with a 23.6% decline, and electric machinery (HS 85) with a decline of 21%.

Figure 4. Decline in US Exports to Mexico through Nogales Port 2020 

Top Imported Commodities: A Mixed Bag of Losses and Gains

As shown in Table 2, the U.S. imports at the Nogales port in 2019 were dominated by three manufacturing commodities and two agricultural commodity groups. Vehicles and parts (HS 87), electric machinery (HS 85), and nuclear reactors, boilers and parts (HS 84) together were worth $7.7 billion and accounted for a good half of all imports (50.8%). Vegetables (HS 07) and fruits (HS 08) were worth $3.3 billion and together accounted for more than one fifth (21.7%) of all imports.

Table 2. Top US Imports from Mexico through Nogales Port, 2019-2020 (Ranked by $ value in 2019)

With the exception of the ores (HS 26) among exports, and agricultural products (HS 07 and 08) among imports, the composition of the leading exported and imported commodities is quite similar. Trade in similar manufacturing commodities reflects to a great extent the integration in manufacturing production between the U.S. and Mexico, most notably in automotive, electronics, and aerospace industries. Because of this high cross-border integration, the pandemic-related reductions and closures in production on one side of the border inextricably affected the other side.

However, unlike top exports, several of the top imports through Nogales port recorded gains in 2020 compared with year ago, as shown in Figure 5.

Figure 5. U.S. Imports from Mexico through Nogales Port 2020 (ranked by % change from year ago)

Among manufacturing products, the optic, photo and medical instruments (HS 90) recorded higher value in comparison with 2019, as did miscellaneous articles of base metals (HS 83). Import of fresh vegetables (HS 07), a staple import of the Nogales port, was up 14.9% from a year ago. It is not clear whether this increase was a result of an increase in unit price or increase in tonnage. What is clear is that pandemic did not impact the flow of food products in the same way as the production of manufacturing goods.

Slight Shifts in the Composition of Cross-Border Commodity Flows

As seen, exports to Mexico through Nogales port were more impacted by the pandemic than the imports in both the number of commodity categories whose exports declined and the total dollar value lost. While in both export and import activity the top manufacturing commodities took the major blow, a number of lesser value commodities experienced manifold expansions.

Among exports, twenty-six commodities saw an increase of at least 5% in 2020. The top seven commodities with more than a doubled dollar value included products rarely mentioned such as beverages (HS 22) with a 308.7% increase, live animals (HS 01) with a 242.1% increase, wood pulp (HS 47) with 192.5% increase, headgear and parts (HS 65) with 158.7% increase, and vegetable textile fiber (HS 53) with a 139.8% increase. Arms and ammunition (HS 93) also recorded substantial increase of 69.9% over year ago. While the overall share of these commodities did increase in 2020, it still remained rather low, less than 6% of the total exported value.

Among imports, thirty-two commodities recorded increases of at least 5% over the previous year. Except for two top imports, i.e., vegetables (HS 07) and optic/medical instruments (HS 90), all other commodities account usually for small shares in total imports. Yet, the pandemic year opened opportunities in trade of such products as silk and yarn (HS 50) with an astonishing increase of more than 800% (although the total value was still below $10,000). Several other products related to home improvements, gardening, and arts, such as clocks (HS 91), carpets (HS 57), vegetable plaiting materials (HS 14), saw increases of several hundred  percent. A number of articles made from metals such as zinc (HS 79), nickel (HS 75), aluminum (HS 76) and other base metals (HS 81), increased in dollar value and also as a share of total imports.  However, aside from vegetables (HS 07) and optic/medical instruments (HS 90), the combined share of other “winners” has remained below 10% of total imports.

Nogales Remains No. 6, but Slightly Improves Its Share Of Cross-Border Trade

Ever since 2016, when Santa Teresa, once a small port in New Mexico, surpassed the dollar value of U.S.-Mexico trade through Nogales, Arizona’s major port has fallen into the sixth place among southern border ports of entry.  The port of Santa Teresa owns its exceptional growth to a purposeful and focused development into an overflow gateway of the nearby El Paso, accompanied by the establishment of international industrial park and new manufacturing facilities on both sides of the border. [2]

While still remaining in the sixth place, because both El Paso and Santa Teresa ports took dipper cuts during the pandemic year, the share of the Nogales port increased slightly from year ago: from 5.7% to 6.0% of all exports, and from 5.8% to 6.3% of all imports through the six southern ports of entry.