By Kunle Falayi
The Virginia Center for Investigative Journalism at WHRO
Amid rising tariffs and U.S. threats to its trade partners, Virginia’s international exports fell sharply while imports rose in the first three months of the year.
The value of the state’s exports fell by 12.5% compared to the same period in 2024, the largest drop in the last decade, falling from $5.7 billion to $5 billion. Exports to Canada, the state’s largest trading partner, fell 5%, according to the most recent data from the International Trade Administration.
At the same time, imports grew 14% as companies boosted inventory in anticipation of rising tariffs. This shot up Virginia’s trade deficit by more than $5 billion. At the same period last year, the trade deficit stood at $3 billion.
Economists believe the shakeup in trade reflects the challenges Virginia’s economy faces this year, as shifts in U.S. trade policy and federal workforce cuts slow down the state’s economy.
“The tariffs have had multiple impacts,” said Economist Bob McNab, who chairs the department of economics at Old Dominion University. “First, they led to a rush of imports in the first quarter into the U.S., increasing inventories in an attempt to evade the tariffs. Second, they created an incentive for other countries’ importers to shift away from U.S. goods.”
Trade accounts for about 11% of Virginia’s GDP, and nearly 90,000 jobs in Virginia are directly dependent on exports. Far more jobs are indirectly reliant on imports and exports, and economists say more Virginians are likely to feel the impacts of a looming trade war in the coming months.
“It is significant, and shows how volatile things have become and how dramatic or negative these changes will be,” said João-Pedro Ferreira, regional economist at the Weldon Cooper Center for Public Service.
Virginia is not considered a major manufacturing state, he said, and the impact of the tariff war is expected to be much greater on states with larger manufacturing economies.
Exports to major trading partners fell
The decline in exports has been most dramatic in agricultural production.
Agriculture is the state’s largest private-sector employer with nearly 400,000 jobs, according to the Department of Agriculture.
In the first quarter of this year, Virginia exported 36% less oilseeds, primarily soybeans and peanuts, than it did in the same period in 2024. Soybeans are the most popular crop produced and sent abroad from Virginia. The value of other agricultural exports, including cattle and meat products, and fruit and tree nuts, also dropped 21% year-over-year.
Underlining the export trend in the last quarter is the decline in Virginia’s exports to its top trading partners—Canada, China, Mexico, Germany, and India. All but Germany and Mexico imported fewer Virginia-made goods when compared year-over-year.
Together, these countries account for more than one-third of the state’s total export value.
Canada, which has been a central focus of President Donald Trump’s trade war rhetoric, imported nearly $90 million less in goods from the state this year.
The country is the main customer of Virginia’s vegetables, mushrooms, cattle, fish, dairy and confectionery products. The state’s automotive industry also benefits significantly from the country’s patronage. More than two-thirds of motor vehicles from the state go to Canada.
Among the top importers of Virginia products, India cut trade the most, dipping by nearly 40% year-over-year.
Despite the dollar weakening in the first quarter of 2025, exports plummeted because other countries retaliated against the US, McNab said.
He believes further disruptions to Virginia’s economy are ahead.
The first-quarter forecasts from the University of Virginia’s Weldon Cooper Center for Public Service predict that the state will lose more than 30,000 jobs this year due to federal government cuts and a slowdown in economic output. The center also expects the unemployment rate to rise to 3.9% this year and reach as high as 4.7% by 2026.
Imports rise with tariff threats
While exports this year have lagged behind last year’s, the state has imported 14% more products from international producers compared to the same period last year.
This is not surprising, experts like McNab said. The White House had been clear about what was coming, so businesses acted accordingly.
“The evidence strongly suggests that what we saw in the first quarter of 2025 was a rush by American businesses to increase inventories ahead of tariffs,” he said.
Nowhere was the first-quarter import surge more evident than in the sharp increase in aerospace parts and motor vehicle purchases. This year, Virginia companies have imported twice as many of these products as they did during the same period in 2024.
Virginia importers bought more than $1.4 billion worth of commodities from China, the state’s top importer. China, Mexico, Canada, and India account for nearly half of the value of first-quarter 2025 imports.
Trade war may deal a blow to the state’s economy in the coming months
Economists expect import levels to plummet in the second quarter of 2025 because businesses already boosted imports to increase their inventories in advance of high tariffs.
The tariff war has prevented many businesses from booking shipments, McNab said.
“Cargo container ships don't sit idle. If they are not going to the U.S., they are going elsewhere,” he said. “Even if somehow the tariff policies were miraculously resolved tomorrow, it will take time for this system to get back into place the way it was in pre-2025.”
McNab sees a possibility of inventory becoming as scarce as during the early months of the COVID-19 pandemic in spring 2020.
When the excess inventories are depleted and imports to replenish those inventories are down, the supply becomes inadequate, he said.
McNab described a catastrophic economic case:
“Demand outstrips supply, prices increase, resulting in shortages and inflation ticks up significantly on top of the inflation that will be induced by the tariffs on the goods that are being imported to the U.S.”
Reach Kunle Falayi at kunle.falayi@whro.org