Arizona’s Exports of Manufacturing Products: Mostly Recovered
Exports of manufacturing products from Arizona to all other countries fared better than those to Mexico
In 2021, Arizona exported $24.2 billion worth of commodities to countries around the world. The importance of manufacturing products in Arizona’s exports cannot be overstated: more than 70% of the total value was contributed by manufacturing products. In comparison, manufacturing products accounted for 60% of all California exports and about 35% of all exports from Texas. In several earlier articles, we assessed the damage of the COVID-19 pandemic to Arizona’s manufacturing exports in particular, but now it is time to review the results of recovery as reflected in trade statistics. Of particular interest are the staples of Arizona’s manufacturing exports – computer and electronic products, transportation equipment, and electronic equipment – with an emphasis on trade with Mexico, Arizona’s primary trading partner.
Computer & electronic products lead the recovery in exports to the world
With $6.9 billion dollars worth of exports in 2021, computer and electronic products (NAICS 334) were the leading manufacturing exports from Arizona to the world, accounting for close to 30% of the total. By the end of 2021, the exports of computer and electronic products surpassed the 2019 level. So did the exports of machinery (NAICS 333) and primary metal products (NAICS331). On contrary, as shown in Figure 1, the export value of the second-ranking transportation equipment group (NAICS 336) was still below the pre-pandemic 2019 level. Even further behind in recovery were exports of electrical equipment (NAICS 335) and fabricated metal products (NAICS 332).
Figure 1: AZ Exports to World: Manufacturing Products, 2019 and 2021
One-quarter of exported manufacturing products destined for Mexico
Of all manufacturing products that Arizona exported to the world in 2021, about one quarter (25.2% measured in dollar value) was shipped to Mexico. This was just a slight decrease from the 25.9% share in 2019. As an export destination for Arizona’s manufacturing products, Mexico is particularly important for electrical equipment (NAICS 335) and primary metal manufacturing (NAICS 331), as shown in Figure 2. In the first group, Mexico accounted for 59.1% of all Arizona’s exports to the world; in the latter, Mexico’s share was even larger at 68.4%. In contrast, Arizona’s exports of computer and electronic products (NAICS 334) and transportation equipment (NAICS 336) depend more on other foreign markets outside of Mexico.
Figure 2: AZ Exports of Manufacturing Products to Mexico and Rest of World, 2021
Shifts in export destinations in post- COVID-19 pandemic
The differential impact of the pandemic on national economies and global trade resulted in shifts in the composition and spatial flow of traded commodities. Data in Table 1 suggest that Mexico gained a few points as the overall destination of Arizona’s exports in 2021 compared to 2019, from 31.3% to 33.8% of the total value of exported commodities. This was primarily due to a lesser negative impact on non-manufacturing commodities, while the share of manufacturing exports slightly declined. Three groups of manufacturing products in which Mexico increased its relative share in 2021 included electrical equipment (NAICS 335), machinery (NAICS 333), and fabricated metal products (NAICS 332). Primary metal products, for which Mexico had been the major destination of Arizona’s exports, dropped from their 80.9% share in 2019 to 68.4% in 2021.
Table 1. Mexico’s Share (%) of AZ Exports to World, Change 2019-2021
Overall, a slower recovery in manufacturing exports to Mexico
With the exception of machinery (NAICS 333) and fabricated metal products (NAICS 332), exported values of all other major groups of manufacturing products from Arizona to Mexico in 2021 were still below their 2019 levels. As shown in Figure 3 (where exports are ranked by 2019 dollar value) the transportation equipment group (NAICS 336) experienced the slowest recovery. By 2021, exports of transportation equipment were surpassed by machinery exports and as a result, dropped from third place to fourth among Arizona’s manufacturing exports to Mexico.
Figure 3: AZ Exports of Manufacturing Products to Mexico, 2019 and 2021
The first half of 2022: back on track, almost
In the first seven months of 2022, Arizona exported $2.6 billion worth of manufacturing products to Mexico. While visually the 2019 and 2022 lines in the last two months almost match (Figure 4), the total for all seven months in 2022 was still 6.3% less than in 2019. This somewhat slower recovery in manufacturing export activity with Mexico resulted in a decline of Mexico’s share to 24.7 % of all Arizona’s manufacturing exports in 2022 compared to the same period in 2019, when it was 27.7%. One of the reasons is that Arizona’s top manufacturing exports are the key inputs into the Mexican automotive industry, which was hit hard by the pandemic, while the recovery was rather slow.
Figure 4: AZ Exports of Manufacturing Products to Mexico 2022, Jan-Jul
In July, computer & electronic products exceeded their 2019 level
Arizona’s primary manufacturing export to Mexico, the computer and electronic product group (NAICS 334), exceeded the 2019 level this year in July (Figure 5).
Figure 5: Arizona Exports of Computer & Electronic Products to Mexico, January-July
As shown in Table 2, semiconductors (NAICS 3334) were the top product group with $703.5 million worth of exports to Mexico in the first half of 2022, thus exceeding the 2019 export value in the same period by 13.8%. In contrast, exports of communications equipment (NAICS 3342) and navigation/measuring equipment (NAICS 3345), were significantly below the 2019 level by 80.6% and 20.3% respectively. The largest increase of 127.1% was recorded in exports of magnetic and optical products (NAICS 3346), although this manufacturing group accounted for less than 1% of the total. The computer equipment (NAICS 3341) and audio and video equipment (NAICS 3343) also recorded increases in 2022 exports over 2019 in the same period, although their shares have remained below 5%.
Table 2. AZ Exports of Major Computer and Electronic Products to Mexico, Jan-Jul
Also on the rise: exports of machinery
Arizona’s exports of machinery products worth $302.9 million in the first half of 2022 (including July) were 16.9% above the 2019 level (Table 3). The industrial machinery group experienced the largest increase (110%) and in 2022 moved to the top accounting for 25.1 % of all exported machinery products to Mexico.
Table 3. AZ Exports of Major Machinery Products to Mexico, January-July
As shown in Figure 6, the exports of commercial and service machinery (NAICS 3333) experienced the second strongest growth of 60.4% compared to the same period in 2019, although still accounting for just above 5% share of total machinery exports. Arizona’s staples among the machinery exports to Mexico -- engines, turbines and power transmission equipment group (NAICS 3336) -- were also up in 2022, but in the total export value slipped behind the industrial machinery products.
Figure 6: AZ Exports of Machinery Products to Mexico, January-July
Exports to the rest of the world in 2022 are relatively stronger than to Mexico
In the overall picture, the exports of manufacturing products from Arizona to all other countries fared better than those to Mexico; exports to the rest of the world were 9.9% higher than in 2019 (January-July), while those exported to Mexico were still 5.9% short of the 2019 value. This reflects different composition of manufacturing exports, most notably the share of the transportation group of products. Among Arizona exports to Mexico the transportation products (NAICS 336) consist largely of parts and equipment for the automotive assembly plants, whereas the exports to the rest of the world include a sizeable volume of high-value aircraft and aircraft parts.