Trump's Tariff Threats: A Potential Blow to U.S. Transportation and Trade

President-elect Donald Trump's proposed tariffs on key trade partners like China, Mexico, and Canada are raising concerns across the $1.7 trillion U.S. transportation industry, a critical economic driver. Experts warn these measures could exacerbate the ongoing trucking recession and disrupt supply chains that support both domestic and international trade.

Impacts on the Transportation Industry

The transportation sector, which moves goods Americans produce and consume, could face reduced freight demand due to higher prices caused by tariffs. Jason Miller, an expert at Michigan State University, highlighted, “Higher prices mean less demand, and less demand equals less freight.”

Trucking, which accounts for one-third of U.S. transportation, is already in a prolonged downturn lasting nearly three years—the longest since the 2008 financial crisis. Analysts fear new tariffs could further harm this sector, along with major players like J.B. Hunt, UPS, and rail operators like Canadian Pacific Kansas City (CPKC) and Union Pacific.

Tariff Ripple Effects

Tariffs proposed by Trump include:

• 25% tariffs on Mexico and Canada: Targeting goods like auto parts and agricultural products unless these countries address immigration and fentanyl issues.

• 10% additional tariffs on Chinese goods: Potentially worsening trade tensions with China, the U.S.’s largest trade partner.

Mary Lovely of the Peterson Institute for International Economics noted these measures could hit U.S. import and export flows, reducing industrial production—a crucial freight driver.

North American Supply Chain at Risk

North America operates as an integrated supply chain, with $88.5 billion worth of goods crossing U.S. borders with Mexico and Canada in September 2024—a 7.7% increase from the previous year. However, new tariffs threaten this growth and could provoke retaliatory measures from trade partners, affecting industries like automotive, manufacturing, and agriculture.

Rail Industry Adjustments

Railroads, heavily reliant on trans-border trade, could face disruptions as well. Companies like CPKC, which merged in 2021 to link Canada, the U.S., and Mexico, aim to capitalize on Mexico’s growing manufacturing base. However, tariff-related slowdowns could derail growth plans.

Economic Implications

While Trump argues tariffs will boost U.S. jobs and revenues, experts caution they act as taxes on consumers and could harm spending, the country’s main economic driver. Dean Croke of DAT Freight and Analytics summarized industry sentiment: “All I see is more disruption and tit-for-tat tariffs.”

In conclusion, while tariffs may serve political goals, their economic consequences could ripple through transportation and trade, affecting prices, demand, and growth opportunities for businesses.