Nogales Port in the Post COVID-19 Recovery of U.S.-Mexico Trade
June 12, 2022
Data for the first three months of this year have shown that the pre-pandemic levels have finally been surpassed. From January through March of 2022 the U.S. exported to Mexico $75.9 billion worth of goods, which was 18.6% above the same period of 2021 and even 18.8% above 2019. Imports from Mexico have rebounded 18.2% from the same period of 2021, and 23.3 % from 2019, reaching a total of $106.2 billion in the first three months.
The overwhelming majority of goods traded between the U.S. and Mexico have been facilitated through land ports along the U.S.-Mexico border, referred here as the southern ports. About 82% of all U.S. exports to Mexico, and about 86% of U.S. imports from Mexico go through the southern ports. The rest of trading in goods (about 18% of exports and 14% of imports) is being facilitated through seaports and inland ports (by air).
Nogales, Arizona’s major border port of entry is one of the top six southern ports. To better assess the recovery of the Nogales port, a comparison is made with trends at other southern ports including Laredo, Hidalgo, and El Paso in Texas, Santa Teresa in New Mexico, and Otay Mesa in California. Before focusing on the Nogales Port, a brief overview of all ports (organized and managed as districts) will provide a glimpse into a larger picture.
The Nogales District Experienced a Slight Decline in Overall Share of Traded Goods Between U.S. and Mexico
Figure 1 shows the importance of border port districts in facilitation of trade between the U.S. and Mexico. The Nogales District, which includes all six Arizona ports at the international border and inland ports of Phoenix and Tucson, accounted for 4.5% of the total U.S.-Mexico trade in goods. Compared to the pre-pandemic 2019, it was a slight decline from 4.7% share. The El Paso District, which includes Texas’ port of El Paso and the Santa Teresa port in New Mexico, also experienced a slight decline (from 17.5 to 17.0%), while the Laredo District in Texas and the San Diego District in California increased their relative shares from 51.4 to 52% and from 10.9 to 11.3%, respectively. Together, border districts slightly increased their share over the non-border districts from 84.4 to 84.8%.
Figure 1. Importance of Border Port Districts in U.S.-Mexico Trade 2021 (% Share)
Southern Districts were Less Affected by the COVID-19 Pandemic than the Rest
The combination of the imposition of specific measures to contain the spread of COVID-19 and a slowdown of economic activities caused a reduction in trading of goods between the U.S. and Mexico through all ports in 2020. As depicted in Figure 2, the non-border ports experienced a reduction of 22.5% over 2019, about double the rate at any district on the southern border. With a 10.8% decrease, the Nogales District was somewhere in between the least affected border ports in California (San Diego District) and the most affected trade through the El Paso District (which also includes New Mexico’s port of Santa Teresa).
Figure 2. U.S.-Mexico Trade in 2020 through All Districts
U.S.-Mexico Trade Recovered Above the 2019 Level at All Districts
When compared with the first pandemic year of 2020, data for 2021 were already encouraging by showing an increase in traded goods between U.S. and Mexico across all ports (at district level). A comparison with the pre-pandemic 2019 has further assured that the recovery had actually been happening. As shown in Figure 3, all southern port districts, except the Nogales District, have outpaced the recovery of trade through the non-border ports. However, the U.S.-Mexico trade through Nogales District in 2021 was only 3.5% above the 2019 level in comparison to 11.9% increase at the San Diego District and 9.3% at the Laredo District.
Figure 3. U.S.-Mexico Trade in 2021 through All Districts
Nogales Port’s Sixth Place in U.S. Exports to Mexico, Unchanged
In 2019, the U.S. exported to Mexico a total of $208.7 billion worth of goods through all southern ports, of which about 90% was facilitated through seven major ports. The Nogales port facilitated $10.0 billion of U.S. exports to Mexico, which placed the Arizona’s major port at the sixth place behind Texas’ ports of Laredo, El Paso, and Hidalgo, California’s Otay Mesa, and New Mexico’s Santa Teresa, but ahead of California’s second largest port of Calexico-East. Figure 4 shows the overwhelming dominance of the Laredo port with $95.2 billion worth of U.S. exports, an amount equal to exports through other six ports taken together. By 2021, due to the uneven effect of the pandemic, El Paso fell from the second place to the fourth place; Otay Mesa and Hidalgo moved ahead, while Nogales retained its sixth place behind Santa Teresa but ahead of Calexico-East.
Figure 4. U.S. Exports to Mexico via Major Southern Border Ports
Nogales Port Moved to Fifth Place in U.S. Imports from Mexico
With the expansion of U.S.-Mexico production sharing framework (initially through the maquiladora program and subsequently trough free trade agreements of NAFTA and USMCA), the imported value of U.S. goods from Mexico has exceeded the exported values. Finished manufacturing goods, such as cars and electric/electronic products that are assembled in Mexico carry higher value as imports to the U.S. than the components and parts exported from the U.S. In 2019, the U.S. imported from Mexico through southern ports a total of $356.2 billion worth of goods, almost $150 billion over the exported value. About 76% came through seven major ports. The Nogales port facilitated $15.1 billion, which placed it at sixth place ahead of Calexico-East, but behind Laredo, El Paso, Otay Mesa, Hidalgo, and Santa Teresa. By 2021, the largest port, Laredo, gained even larger share of imports from Mexico, while the El Paso port experienced the heaviest negative impact of the pandemic. Coupled with the slowest recovery, the El Paso port dropped from second place in 2019 to the seventh place in 2021 behind Calexico-East. This resulted in Otay Mesa, Hidalgo, Santa Teresa and Nogales moving one place up on the ranking scale.
COVID-19 Effect on Nogales Port: Substantial, but not the Worst
COVID-19 effect on Nogales port: substantial, but not the worst Figure 5 and Figure 6, show the effects of the first pandemic year on U.S. trade with Mexico through major southern border ports. On average, exports were in general less affected than imports; in 2020 exports were 14.2% below 2019, compared to 17.9% decline in imports. As shown in Figure 5, with a decline of 15.4% in exports, the Nogales port was more affected than Hidalgo and Otay Mesa ports, but fared much better than the two most affected ports, El Paso (-52.2%) and Santa Teresa (-29.6%).
Figure 5. COVID-19 Effect on Exports through Major Southern Border Ports
With the respect to imports from Mexico (Figure 6), the Nogales port with 10.9% decline was more affected than Otay Mesa, Laredo, and Hidalgo (between -3.5 and -7.9%), but less affected than devastated El Paso (-68.2%).
Figure 6. COVID-19 Effect on Imports through Major Southern Border Ports
Nogales Port on a Slower Recovery Pace
Even with increased values over the first pandemic year, U.S. exports and imports through the Nogales port in 2021 were still 1.8% below the 2019 levels. As shown in Figure 7, the largest gains in exported goods to Mexico occurred at the Hidalgo port (26.8% above 2019 levels), while El Paso and Santa Teresa’s levels were still significantly below 2019 (-50.5% and -18.0%, respectively).
Figure 7. Recovery of U.S. Exports through Major Southern Border Ports
Imports were overall recovering at a slower pace than exports. The port at Otay Mesa experienced a 14.2% increase over 2019, followed by Hidalgo and Laredo (10.5% and 9.2% respectively). U.S. imports through Nogales were still about 2% below 2019 level (Figure 8).
Figure 8. Recovery of U.S. Imports through Major Southern Border Ports
Top Manufacturing Products: Catching Up with Pre-pandemic Levels
One fourth (25.7%) of all U.S. exported goods to Mexico through the Nogales port in 2019 was classified as HS 85 encompassing products such as parts for electrical apparatus, insulated wires and cables, phone sets, electronic integrated circuits, and electric storage batteries. Both exports and imports experienced deep decline early in the pandemic, but started recovering by early summer of 2020. As shown in Figure 9, by March 2022, the import of HS 85 products finally exceeded every monthly value of last three years. Exports, although on a recovering trend, have not yet surpassed the 2019 values.
Figure 9. U.S. Trade in HS 85 with Mexico 2019-2022 by month ($)
The second most important group of traded manufactured products is directly related to the automotive industry. The majority of exported products within HS 87 consist of parts and accessories for motor vehicles, while assembled cars make up the majority of imported products. Figure 10 shows U.S. exports and imports from Mexico of HS 87 through the Nogales port on a monthly basis since January 2019. The imports of vehicles assembled in Mexico show high fluctuation rates from month to month, which partly reflect the nature of car production, while several deep cuts during 2020 were clearly related to COVID-19 affects. At the end of 2021, the imports picked up and surpassed any previous month during the observed period.
Figure 10. U.S. Trade in HS 87 with Mexico 2019-2022 by month ($)
Slowly, but Surely into 2022
While it is still difficult to grasp all implications of the COVID-19 related reductions in U.S.-Mexico trade on the local economy of Nogales and Santa Cruz County, as well on Arizona as a whole, it may be somewhat comforting to know that the Nogales port was not hit as hard as some other leading southern ports such as El Paso or Santa Teresa. The first three months of this year show a slower recovery in U.S. exports to Mexico through the Nogales port compared to the national average (3.8% through the Nogales port, 18.6% through all ports in 2022 versus 2021). The growth in imports through the Nogales port, however, exceeded the national average (28.8% compared to the national average of 18.2%). Nogales retained its relative position among six major southern ports (sixth in exports) and even moved little bit up with respect to imported goods (fifth place).