Three Things to Know: July 14

This week's information compiled by your SC Chamber team includes: 
Data Shows Mexico Overtaking China as Top U.S. Trade Partner, Surveys Show Small Business Sentiment Remains Mixed, SC Airports Send Letter to Congress on DCA Perimeter Rule

 1. Data Shows Mexico Overtaking China as Top U.S. Trade Partner

According to the United States Census Bureau, Mexico has overtaken China as the United States’ top trading partner for the first five months of 2023 with total bilateral trade between the two countries totaling $328 billion. U.S. imports from Mexico neared $195 billion with exports totaling roughly $133 billion. Data also shows that bilateral manufacturing trade between the U.S. and Mexico has increased and overtaken similar trade with China and Canada. Nearly a quarter of the total manufacturing trade activity between the two countries is a result of the automotive industry.

Mexico, China, and Canada regularly compete for the U.S.’s top trading partner slot with China holding the mantle in 2022, Canada in 2021, and Mexico in 2019 according to the Census Bureau. China’s drop in the rankings coincides with the country seeing its largest overall decline in export value this month.

In 2022, Canada was the top export market for South Carolina-made products and services according to the S.C. Department of Commerce (S.C. Commerce) and the South Carolina Ports Authority (SC Ports) with sales exceeding $4.4 billion. Total exports for South Carolina in 2022 totaled $31.5 billion and the state remains the country's national leader in the export of completed passenger vehicles and tires.

2. Surveys Show Small Business Sentiment Remains Mixed

The National Federation of Independent Business (NFIB) recently released the results from their small business survey from June 2023. The report revealed that their Small Business Optimism Index did increase 1.6 points to 91.0, however this is still below the 49-year average of 98. The main small business concerns that owners reported are inflation and labor quality, which were tied with 24% each that owners identified as their single most important problem. With respect to this latest report, NFIB Chief Economist Bill Dunkelberg stated, “Halfway through the year, small business owners remain very pessimistic about future business conditions and their sales prospects. Inflation and labor shortages continue to be great challenges for small businesses. Owners are still raising selling prices at an inflationary level to try to pass on higher inventory, labor, and energy costs.”

However, some are optimistic over the current state of small businesses. The MetLife and U.S. Chamber Small Business Index score for small businesses was 63.1 for Q2. This is an increase from its Q1 score of 60.0. Their data shows that hiring plans and revenue expectations reached record highs for the Index this quarter, since its inception in 2017. 71% of small business owners expect their revenue to increase in the next year, and 47% anticipate hiring more staff during that same period. Additionally, 42% of small businesses say they plan to increase investment in the next year, up from 38% last quarter. Consistent with the NFIB findings, the Index also reported that inflation tops the list of challenges that owners are facing.

While the state of small businesses still seems fairly negative compared to the past, things do seem to have stopped getting worse and are likely on the upswing. The share of companies planning for capital expenditures and the share of owners who are expecting better business conditions in the next six months showed significant improvement in the latest reports.

3. SC Airports Send Letter to Congress on DCA Perimeter Rule

South Carolina’s six commercial service airports (Charleston, Columbia, Florence, Greenville-Spartanburg, Hilton Head, and Myrtle Beach) recently sent a letter to the U.S. Senate’s Commerce, Science, and Transportation Committee expressing their concerns with potential changes to Washington, DC’s Ronald Reagan Washington National Airport’s (DCA) 1,250 mile perimeter rule that restricts the number of long-distance flights that can go in and out of DCA on a daily basis. The airports are concerned that the elimination of the perimeter rule could have a significant economic impact on regional airports operating within the current perimeter and lead to reduced direct access to DCA from the region.

Proposals to eliminate DCA’s perimeter rule and to add additional long-distance flight slots (28) have caused significant debate in Congress and are being considered as part of the Federal Aviation Administration’s (FAA) reauthorization bill that Congress must pass before its expiration at the end of the fiscal year.

Supporters of changes to the perimeter rule and the addition of new long-distance direct flights say they will lead to greater access to the nation’s capital for passengers across the country and increase competition in the marketplace, ultimately driving down ticket costs. Opponents of the changes argue that DCA does not have the ability to handle additional flight capacity which could lead to increased delays, and also that regional airports operating within the existing perimeter could lose direct flights to and from DCA as a result of prioritization of markets further out.