Written by Lisa Bertlein
LOS ANGELES (Reuters) – President-elect Donald Trump’s threat to impose tariffs on major trading partners China, Mexico and Canada will hurt the $1.7 trillion U.S. transportation industry. Industry experts said this would worsen the nearly three-year-old truck slump.
The industry, which powers everything Americans make and buy, is seen as an economic bellwether and is at the forefront of the unintended consequences of trade policies that President Trump says will help, not hurt, American businesses. This will be one of the industries that informs the public.
“Tariffs like the ones proposed would increase prices, and higher prices mean less demand. Lower demand means less demand,” said Jason Miller, interim dean of the School of Supply Chain Management at Michigan State University’s College of Business. “This is equivalent to a decrease in cargo.”
Virtually all shipping companies operating in the United States are exposed to tariff-related revenue reductions. The largest companies include trucking and delivery companies JB Hunt Transport Services and united parcel Services (NYSE:) and Railroad Operators canadian pacific (NYSE:) Kansas City and union pacific (New York Stock Exchange:).
JB Hunt did not respond to a request for comment, and UPS declined to comment. Railroad operators said they are prepared to respond if tariffs are imposed.
President Trump is keen to use tariffs to create jobs and raise revenue to replace what would be lost with planned tax cuts, even if those import taxes are effectively the most powerful for consumers. Even if it means a new tax on consumers, who are the driving force behind the economy.
But economists and transportation officials say he also appears to be using the threat of tariffs to force U.S. trading partners to bend on non-trade issues, such as border security. China and other U.S. trading partners are not backing down, arguing that tariffs will only hurt everyone involved.
President Trump says he will impose 25% tariffs on products from Mexico and Canada unless the governments crack down on immigration and fentanyl flowing into the United States, adding at least 10% to the tariffs already imposed. Regarding Chinese products, it has also announced that it will impose additional tariffs.
The United States is the world’s number one importer and number two exporter. Mary Lovely, a senior fellow at the Peterson Institute for International Economics who studies the impact of the U.S.-China trade war, said Trump’s threat of tariffs would reduce flows in both directions.
“We’re hopeful that the new administration will start moving soon,” Lovely said, adding that President Trump’s new tariffs could go into effect in the second or third quarter of next year.
Trump Tariffs – Sequel
Trucking accounts for about one-third of U.S. transportation, more than any other sector.
Tariffs imposed by President Trump during his last term contributed to the trucking slump that lasted most of 2019.
“We’ve seen this movie before, so we know how this is going to play out,” said Dean Cloke, principal analyst at DAT Freight and Analytics, which connects trucking companies and shippers. ” he said.
“All I see is more chaos and retaliatory tariffs,” Croke said, echoing a sentiment widely held in the transportation industry.
Michael Castaninet, president of North American ground transportation for CH Robinson Worldwide (NASDAQ:), said U.S. trucking has been in a nearly three-year downturn, the longest and most severe since the global financial crisis. Ta.
Experts say any new import taxes would be a big deal as industrial production, a key driver of domestic and international output from sectors such as mining, manufacturing, chemicals and power, remains stubbornly flat and coronavirus This will conflict with the lingering overcapacity caused by the transportation boom.
President Trump’s new tariffs on Mexico and Canada in particular will hurt one of the few growth areas in trucking.
The value of cargo moving between these countries and the United States, which includes finished cars, auto parts, and avocados from Mexico, and steel and lumber from Canada, increased by 7.7% year-on-year in September 2024. It has reached $88.5 billion. Submit to the U.S. Department of Transportation, Bureau of Transportation Statistics (BTS).
“Many of our customers, especially automotive customers, treat North America as one integrated supply chain, and some of their cargo actually crosses the Mexico-Canada border,” C.H. Robinson’s Castaninet he said.
This interaction makes the United States vulnerable to retaliatory tariffs.
cross-border trade
Anthony Hatch, an independent railroad analyst, said President Trump’s tariff threat could derail plans for railroads to shift from cost-cutting and efficiency efforts to growth.
North American cross-border rail fares were $17 billion in September, down 5.4% from a year ago, according to BTS data, but still an opportunity for the industry.
Canadian Pacific acquired Kansas City Southern Railway (NYSE:) for $31 billion in 2021, combining both companies into an organization known as CPKC, creating the first railroad to connect Canada, the United States, and Mexico. The merged companies aimed to take advantage of China’s expansion of factories in Mexico, which recently overtook China to become the United States’ No. 1 trading partner.
“Despite the rhetoric and headlines, the bottom line is that President Trump’s first term saw a significant increase in North American free trade and the establishment of new free trade agreements,” a CPKC spokesperson said.
Union Pacific, which covers much of the western United States, also has connections to and investments in Mexico.
“If the economy slows down, we have the ability to cut a lot of costs,” Union Pacific CEO Jim Vena said at a recent investor conference, citing weak demand related to tariffs. ” he said.
