Many of the places in Virginia that voted most strongly for Donald Trump also have the most at risk if any trade wars he initiates results in retaliation by our trade partners.
That’s the unspoken, but unmistakeable, takeaway from a new study on Virginia trade that was released Friday.
The study, prepared for the Virginia Chamber of Commerce and Virginia Economic Development Partnership by the Raymond A. Mason School of Business at the College of William & Mary and the Glen-Allen based Magnum Economics, computes how much international trade drives the state’s economy. OK, that’s a pretty boring sentence. Let’s try this: This is the first time I’ve seen figures for how dependent each locality is on international trade, and some of the numbers are pretty staggering.
Generally speaking, rural Virginia is far more dependent on international trade than the state’s metro areas. In Southwest Virginia (defined in this report as anything from Wythe County to the west), 56.1% of the region’s economic output is dependent on trade. By contrast, Hampton Roads, home to the second-biggest port on the East Coast by tonnage, has just 6.4% of its economy driven by international trade.
Granted, those Southwest numbers are swelled by coal exports, but even in rural counties that have nothing to do with coal, the dependence on international trade is often far higher than in metro areas. In Henry County, 37.5% of the economy depends on trade, while in Norfolk it’s just 5.1%. True, this report is computing those figures based on the economic value of goods and services being exported, so port workers technically aren’t creating those goods and services, but the point is the same. In Henry County, 37.5% of the economy is driven by international trade; the state average is 10.5%.
For anyone who thinks that rural areas are remote and disconnected while metro areas are more plugged into the international economy, these statistics show just the opposite.
If those numbers amaze you, then this column’s for you.
Exports are driving Virginia’s economic growth
Only 13 states have more exports than Virginia. We’re ranked 14th. Since we’re the 12th most populous state, that trade ranking may not sound out of the ordinary, but here’s where things start to get interesting: From 2012 to 2022 (the last date for which statistics are available), Virginia’s exports grew at a faster rate than nationally. The nation’s exports grew by 39.4%; Virginia’s by 55.0%.
Virginia’s exports during that time also grew faster than the state’s overall growth in gross domestic product, “which means that exports not only expanded the state’s economy, but they also caused it to grow at a faster rate than would otherwise have been the case,” the report says.
That’s kind of a big deal.
Here’s another way to measure that: In 2014, about 7.8% of Virginia’s economy was tied to exports. Now it’s 10.5%, so trade is becoming a bigger part of the state’s economy.
Trade-related jobs generally pay more than other types of jobs
Here’s one reason international trade is a good thing economically: Those jobs pay better.
The median annual pay in Virginia is currently $49,420, according to the Virginia Employment Commission. For jobs related to exporting goods, it’s $68,400, according to chamber President and CEO Barry DuVal. For jobs related to exporting services, it’s $98,200.
Based on those numbers, we need more international trade, not less. Obviously there are places where trade hasn’t worked out well — like the collapse of furniture and textiles across parts of Southwest and Southside two decades ago — but we’re talking aggregate numbers here. It all depends on what you’re producing and trading. That brings us to this …
Most of Virginia’s exports are services, not goods
If you think of exports as something sent by rail or truck to Hampton Roads and then loaded on a cargo ship, you’re wrong. Nearly two-thirds of Virginia’s exports — 64.1% — are actually in the form of services, not goods. Only one other state has a higher share of exports in the form of services; that’s Hawaii at 92.3%. (It ain’t all pineapples there!) Nationally, 35.1% exports are in the form of services, so that shows how service-oriented Virginia’s economy is. We often compare ourselves with North Carolina, so here comes the Old Dominion vs. Tar Heel comparison: In North Carolina, only 29.1% of the state’s exports are services. When it comes to the export economy, Virginia looks more like Colorado, which ranks right behind us with 63.1% of its exports being services.
What are services that can be exported? In GO Virginia Region 7 (Northern Virginia), the state’s top services exporter, the most-exported service falls under the heading of “Management, Scientific, and Technical Consulting Services.” In GO Virginia regions 4 (Richmond), 5 (Hampton Roads), 6 (Fredericksburg) and 9 (Charlottesville), the top exports fall under the category of licensing intellectual property. By contrast, the top export in GO Virginia Region 8 (Shenandoah Valley) is “animal slaughtering,” although intellectual property is now close behind, a sign of how the economy there is changing. Speaking of which:
Virginia’s export economy has changed dramatically over the past decade
It’s been nine years since the chamber produced a report on trade as detailed as this one. That study in 2015 found that 53% of Virginia’s exports were in goods, 47% were in services. Now it’s 64.1% in services and 35.9% in goods. The raw number of goods being exported from Virginia has increased in that time (up 36.2%), but service exports have grown even more (68.2%). This highlights how fundamentally our economy has changed in Virginia. In terms of dollar value, only four states export more services than Virginia does, and they’re all bigger states: California, New York, Texas and Florida, in that order. In terms of service exports, Virginia is punching well above its weight. There’s a reason for that:
Virginia’s exports are being driven by Northern Virginia
About two-thirds of Virginia’s service exports (65%, if you want to be precise) are coming out of Northern Virginia.
The national growth rate for service exports between 2012 and 2022 has been 38.4%; in Virginia, it’s been 68.2%, and that’s overwhelmingly due to Northern Virginia.
Overall, 41.7% of Virginia’s total exports are now coming out of Northern Virginia. Exports once meant a factory or a mine and “stuff” being shipped to a port. Now it mostly involves an internet connection (and maybe a major airport).
I started off talking about how trade-dependent rural areas are, and so far I’ve mostly talked about Northern Virginia. Let’s change that right now.
Southwest Virginia is more dependent on exports than any other part of Virginia
With all those service exports, Fairfax County produces more exports than any other locality in Virginia — $19 billion worth. However, Fairfax County’s economy is so large that international trade accounts for just 13.4% of the county’s total economic output, what the report calls “export intensity.” That’s the key figure to pay attention to.
The locality with the second-biggest export economy is … Buchanan County, where exports account for $5.5 billion. That’s almost entirely coal. The report suppresses the “export intensity” for a few localities for proprietary reasons, Buchanan County being among them. However, just because the report suppresses the data doesn’t mean we have to. There are other means to figure out this. Using U.S. Commerce Department data, we can find Buchanan County’s GDP. and this report has its export totals. From there, it’s just a matter of math to conclude that 51.3% of the county’s GDP is based on exports. Even if that’s off by a squib, the point is plain: Half or more of Buchanan County’s economy is tied to the export economy.
In Dickenson County, the figure is 55.6%. If you need to understand why legislators representing Southwest Virginia feel so strongly about coal, this is why. Until someone manages to build a new economy there, those counties’ economies are going to rise or fall based on coal.
Overall, you’ll see in the chart above how GO Virginia Region 1 in Southwest Virginia is more dependent on exports than any other part of Virginia — almost five times as dependent as Northern Virginia, the next highest (Region 7) and almost nine times as dependent as Hampton Roads (Region 5). Even though most of the counties in Region 1 don’t produce coal, coal accounts for 78% of the total exports from the region in terms of dollar value.
Many rural economies are more dependent on exports than urban ones
Even once we move away from coal country, we generally find rural areas more dependent on exports than metro areas. The map above shows the percentage of each locality's economy that is due to exports. Outside the coal counties, the highest figures are 37.5% in Henry County, 33.7% in Pulaski County, 28.9% in Orange County, 25.6% in Amherst County, 23.9% in Alleghany County.
The “export intensity” figures for Covington and Hopewell are also suppressed for technical reasons. It's harder to guesstimate the percentages there because the federal government combines both cities with a neighboring county for data purposes. (Our system of independent cities often trips up federal statisticians.) However, it appears that when Alleghany and Covington are combined, their total “export intensity” is 61.4%. The vast majority of those exports are coming out of Covington (presumably the WestRock paper mill), so the percentage for Covington alone must be looking at almost 100%.That means Covington is the most trade-dependent place in the state. The figure for Prince George County and Hopewell together is about 46.5%; since Prince George alone is 14.7%, it seems reasonable that the figure for Hopewell alone is well over 50% of the economy tied to exports.
Some rural areas produce more exports than urban areas
This map shows the dollar value of exports by locality. Notice how little this has to do with the size of the community. Roanoke is bigger than Lynchburg but Lynchburg produces more exports than Roanoke. So do Covington, Henry County, Montgomery County and Pulaski County for that matter, just to name some nearby communities.
A lot of exports doesn’t always translate into local wealth
Unfortunately, having a lot of exports doesn’t necessarily translate into wealth for a locality. It might in service-driven Fairfax County but doesn’t in goods-driven, and coal-driven, Buchanan County or some other rural counties. Buchanan County has the state’s second-largest amount of exports, by dollars, but also one of the state’s lowest median household incomes. Coal miners make good money — the average wage in Virginia is $103,064 — but there just aren’t many of them and not much else there to drive the economy. Extractive industries historically have produced wealth for somewhere, not just the communities where the extraction is taking place. Otherwise, we’d see schools such as Carnegie-Mellon University and Vanderbilt University in coal communities.
The state's economic divide by goods and services
This map shows which exports predominate in each locality: goods or services. This is a rough way of drawing a distinction between the “old economy” and the “new economy,” although there are some curious exceptions. Rural Craig County doesn't have many exports, but most of the ones it has are services. Likewise, Martinsville’s exports are overwhelmingly services. I’m betting at one point in its industrial past, they were mostly goods. On the other hand, even a major suburban county, such as Chesterfield County, has exports that are mostly goods, not services. I'm intrigued by how closely this map matches up with previous maps for the growth in remote workers, particularly along the eastern slopes of the Blue Ridge and around the Chesapeake Bay. Are those remote workers producing service-related exports? Quite conceivably, depending on the nature of their remote work.
The politics of trade are tricky
Here's where we bring things home. Many of the localities that voted mostly strongly for pro-tariff Trump are the ones most at risk if other countries raise or impose tariffs in retaliation for any that he enacts.
I asked DuVal about this and he was properly circumspect. “The state chamber is supportive of any international trade public policy that will improve exports and improve the business climate,” he said. “We certainly want to support international trade policies that open more trade doors than close them.”
Trump has multiple reasons for raising tariffs that may vary from place to place. He'd like to raise the price of Chinese goods to encourage companies to re-shore their manufacturing from China to the United States. He's threatened tariffs on Canada and Mexico mostly as a way to gain leverage over border issues. With other countries, he'd like American companies to have better access to those markets. The international economy is connected in complicated ways, though. By now, we've probably all heard about how many vehicles assembled in the United States have lots of parts from Canada and Mexico. If tariffs were imposed on those imports, the price of a new pickup truck will likely rise, even though it's assembled in the United States.
Canada doesn't have much choice than to do whatever Trump wants. About 75% of that country's exports go to the United States, so it really needs to maintain access to American markets. Canada, though, has retaliated in the past by jacking up tariffs on certain American goods.
Here's what we need to be mindful of. While Canadians are dependent on us, we're also dependent on them, just less so. In 2023, the top destination for Virginia exports was Canada — and the Canadian market was almost as big as our next two foreign markets, China and India, combined. Mexico came in fourth. For Virginia's top two export products — coal and soybeans — there are other markets available. Our coal and soybeans may be superior — by price, shipping distance, quality, whatever — but if other countries decided to retaliate against U.S. tariffs by slapping their own on American products, some customers may look for other, cheaper, sources. We sure don't want that.
“America is about 5% of the world's population; we need to be connected to the outside world,” DuVal says. “It just provides more prosperity here at home.”
Trade isn't just a federal issue
It's no accident that the chamber released this report at a trade summit where the next governor spoke — be that Democrat Abigail Spanberger or Republican Winsome Earle-Sears. The chamber would like to see state government do more to promote trade. “We could use more funding to help more businesses take advantage of export opportunities,” DuVal said. He's got smaller companies in mind, with 200 employees or less. Big companies can often take care of themselves, but small companies may have export opportunities they don't even know about and lack the expertise to take advantage of them.
This is a lot of data, but it's an important documentation of how the state's economy is changing, and how it's put together. “I think this is an eye-opening, insightful study,” DuVal said. I agree.
How ranked-choice voting might benefit Republicans
Last week I wrote a column about how ranked-choice voting advocates need more examples of how the method would benefit Republicans because all the examples cited this year in Virginia would benefit Democrats. Some readers provided examples of where ranked-choice voting would have helped Republicans in previous elections, so I'll share those Friday in West of the Capital, our weekly political newsletter.
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