Donald Trump wasn’t even back in his office at 1600 Pennsylvania Avenue late last year when he astounded the trucking industry with his on-again, off-again threat of heavy tariffs not just on China, but America’s closest partners.
Yet, in the end, President Trump appears to softening on the nation’s two largest trading partners—who just happen to be our neighbors.
Trade among the three North American countries has risen about 28% since 2018 when the original North American Free Trade Agreement (NAFTA) was re-negotiated. Its replacement, the Trump-negotiated U.S.-Mexico-Canada Agreement (USMCA), is due to be renegotiated next year.
In January 2025, total value of North American trans-border freight moved by all modes of transport hit $134.4 billion—that’s a 8.2% increase from a year earlier, according to the U.S. Department of Transportation (DOT).
As we’ve been closely following in Logistics Management, Trump softened his promise of 25% tariffs across North America in early spring. Instead, Mexico and Canada imports will be taxed at 10% (except car parts, which are at 25%).
However, it’s yet to be seen how long they will last, what adjustments might be negotiated, what specific industries (and individual companies) might petition for waivers, or exactly what 2025 and beyond will finally look like.
Tariffs, tariffs everywhere
It’s important to keep in mind that freight flowing under the USMCA continues tariff-free in most cases. However, the existing 25% tariffs for non-USMCA goods implemented in March remained in place. Auto, steel and aluminum exports from Canada and Mexico remain under separate, previously announced 25% tariffs under Section 232 of the USMCA.
For products that can’t claim USMCA preferential treatment, the 25% International Emergency Economic Powers Act (IEEPA) duty rates established under Trump’s executive orders will apply. A 10% tariff continues to apply to energy, energy resources and potash from Canada. Components of an article substantially finished in the U.S. would also be duty-free.
“It’s very obvious there are a bunch of ‘moving parts’ on the tariff horizon,” says Mike Regan, chief relationship officer and founder of TranzAct, a freight management and consulting firm. “That’s why support from qualified outside parties can be so important for navigating these turbulent waters.”
Such tariffs would dampen the entire $1.7 trillion American transportation economy. But trucks and railroads would be especially hard hit, especially those such as J.B. Hunt, UPS, Union Pacific railroad and others specializing in cross-border transport.
“Tariffs like those proposed will raise prices, and higher prices mean less demand—and less demand equals less freight,” says Jason Miller, interim chair of the department of supply chain management at Michigan State University’s college of business.
Or perhaps it’s merely a head fake. “Sometimes this is used as a negotiating chip,” said American Trucking Associations (ATA) chief economist Bob Costello as the tariff talk began.
No matter how it plays out, the trucking industry will be monitoring freight demand closer than ever. So will Mexico and Canada, which have become increasingly significant sources of domestic freight as manufacturers have shifted facilities to North America.
With those moving targets—tariff talk and next year’s supposed renegotiation of the USMCA agreement—as a foundation, let’s take our annual deep dive into forces driving the growing cross-border transportation business.
Cross-border trade numbers
According to the Bureau of Transportation Statistics, freight between the U.S. and Mexico rose by 10.6% last year from 2023. This growth is only expected to continue trending upwards, tariffs notwithstanding.
Except for the European Union collectively, Mexico and Canada are America’s largest trading partners, at 15.8% and 14.3% of the total U.S. trade according to figures supplied by the U.S. Commerce Department.
However, relations among the three partners are fraying. In fact, it’s gotten so tenuous that insurance companies are now offering Supply Chain Insurance (SCI) as a specialty “all-risk” type of insurance that responds to losses caused by supply chain disruptions. Those include things as political risks, labor disputes, cyberattacks, infrastructure closures, regulatory actions and natural disasters.
SCI can also be tailored to the specific types of risks applicable to the policyholder’s business. For this reason, unlike most commercial policies, SCI may cover losses beyond those resulting from physical damage (transportation disruptions caused by a global pandemic) depending on the specific policy language.
It’s gotten so forbidding that some cross-border supply chain experts and international trade professionals say that companies should consider purchasing SCI to close potential coverage gaps and mitigate losses from cross-border risks.
With the success of USMCA and the growing trend of nearshoring, the North American supply chain had become highly integrated and supports millions of jobs—at least before the tariffs. The majority of economists says imposing border taxes on our two largest and most important trading partners will undo this progress and raise costs for consumers.
Not only will tariffs reduce cross-border freight, but they will also increase operational costs. Because of tariffs and residual costs, the price tag of a new truck could rise by up to $35,000, according to estimates. That amounts to a $2 billion annual tax and putting new equipment out of reach for small carriers, ATA president and CEO Chris Spear says.
“The longer tariffs last, the greater the pain for truckers as well as the families and businesses we serve,” says Spear. “To prevent unnecessary economic pain, the trucking industry urges all parties to come to the table once again to swiftly reach a new agreement.”
Here in the U.S. there are 100,000 full-time truckers hauling—the ones who carry 85% of the surface trade in goods with Mexico and 67% of the goods traded with Canada—and they will bear a direct and disproportionate impact if any tariffs-induced slowdown in cross-border trade occurs, according to Spear.
Cross-border improvements in the works
Cross-border tariff uncertainty aside, the mere size of the North American market demands modernization.
In normal times, manufacturers and others involved in border transport have rushed to expand cross-border services, considering that Canada and Mexico account for $919 billion of imported freight coming into this country—and $683 billion in exports to those countries, according to the Commerce Department.
Among the new projects recently unveiled or coming soon:
- The $83 million expansion of the Anzalduas International Bridge at McAllen, Texas, will have a significant impact on cross-border trade when is completed this year. The original 3.2-mile bridge was open to passenger vehicles and empty commercial trucks driving south into Mexico. The expansion will allow full cargo truck crossings southbound while two additional lanes were added—one each for northbound and southbound commercial trucks to go in and out of Mexico. It will process an estimated 1,200 to 2,000 trucks a day.
- Mexico has announced a project aiming to transform the Port of Manzanillo on the Pacific Coast into a major global container shipping hub. It will increase capacity at the Port of Manzanillo from 3.9 million twenty-foot equivalent units (TEUs) to10 million TEUs, as well as expand the port from 1,112 acres to 4,448 acres. It’s expected to be completed in 2030.
- Speedy Freight, a same-day courier, recently opened a 50,000-square-foot warehouse near Dallas. The firm aims to launch eight franchises in the U.S. by the end of 2025.
- John Deere is building a $55 million manufacturing plant in Monterrey, Mexico. It will focus on producing machinery for the construction market in North America. It is scheduled to begin operations in 2026.
“Despite political changes, our position is to aim for development as a company,” says Gecimar Morini, John Deere’s manager for Mexico, Central America and the Caribbean. “We see Mexico as an attractive market, which is why we’re investing in the expansion of our dealers and growth in new territories.”
Transportation lawyers and experts say “don’t be afraid to ask for legal help” for your specific tariff situation regarding cross-border freight. There are minefields on all areas, including the often-Byzantine world of Customs. Each of the three countries—U.S., Canada, Mexico— could have conflicting information for the same product.
“Be very mindful under U.S. Customs regulations, as you’re responsible for all sourcing records of where imported goods actually come from,” says Dan Ujczo, a partner with Thompson Hine, a law firm that specializes in import/export work. “Get some help if you are unsure. It’s a very complicated subject.”
Four steps to handle post-tariff operations
Holly Pearce, logistics director for Otis Elevator, says the additional container cost on China vessel lanes might add as much as $1,000 to a one-way journey from the Far East. But she believes there are four lessons on how to handle post-tariff operations:
- Understand where your sourcing countries are, add the cost of tariffs to the freight cost and share with your executive teams.
- Understand your customs bond’s limits. If your invoice was $1 million, increase that amount to cover additional transaction fees. “If you have insufficient bond, it’s going to limit your ability to get your freight out of port,” says Pearce.
- Examine expanding into foreign trade zones. These work for goods taken out of bonding facilities, eliminating U.S. duties on foreign-made goods.
- Consider near-shoring. Be aware that is a long-term project that cannot be set up overnight.
According to Pearce, that’s the formula. But in the fast-moving world of tariffs and other cross-border policies, it’s all subject to many, many changes. Stay tuned.
