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Tariffs could worsen three-year trucking recession,

experts say

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Trucking accounts for one-third of U.S. transportation

sector

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Tariffs threaten growth in U.S.-Mexico-Canada trade,

experts

warn

By Lisa Baertlein

LOS ANGELES, Dec 13 (Reuters) - President-elect Donald

Trump's threatened tariffs on top trade partners China, Mexico

and Canada would deal a blow to the $1.7 trillion U.S.

transportation industry and worsen a nearly three-year trucking

recession, sector experts said.

The industry that moves everything Americans make and buy is

considered an economic bellwether, and will be among the first

to signal any unintended consequences of trade policies that

Trump says will help, not hurt, U.S. businesses.

"Tariffs like those proposed will raise prices, and higher

prices mean less demand. Less demand equals less freight," said

Jason Miller, interim chair of the department of supply-chain

management at Michigan State University's business college.

Virtually every transportation company operating in the

United States is exposed to tariff-related revenue downturns.

The biggest include trucking and delivery firms J.B. Hunt

Transport Services and United Parcel Service ( UPS ) as

well as railroad operators Canadian Pacific Kansas City ( CP )

and Union Pacific ( UNP ).

J.B. Hunt did not respond to requests for comment and UPS

declined comment. The railroad operators said they were prepared

to respond when and if tariffs come through.

Trump is keen to use tariffs to create jobs and raise revenue to

replace that will be lost with planned tax cuts, even though

those import levies would in effect serve as a new tax on

consumers, whose spending represents the country's most powerful

economic driver.

But he also appears to be using tariff threats to force U.S.

trade partners to relent on nontrade issues like border

security, economists and transportation executives said. China

and other U.S. trade partners have not backed down, saying the

tariffs would serve only to hurt all involved.

Trump has said he would slap tariffs of 25% on goods from

Mexico and Canada unless those governments crack down on the

flow of immigrants and fentanyl into the U.S. He has also vowed

to add tariffs of at least 10% on top of what is already imposed

on Chinese goods.

The United States is the world's No. 1 importer and No. 2

exporter. Trump's threatened tariffs would decrease flows in

both directions, said Mary Lovely, a senior fellow of the

Peterson Institute for International Economics, who studies the

impact of the U.S.-China trade war.

"We expect that the new administration will get to work

right away," said Lovely, who added that Trump's new tariffs

could start hitting in the second or third quarters of next

year.

TRUMP TARIFFS - THE SEQUEL

Trucking accounts for about one-third of U.S.

transportation, more than any other sector.

Tariffs imposed by Trump during his previous term

contributed to a trucking recession that lasted for most of

2019.

"We've seen this movie before, so we know how this plays

out," said Dean Croke, principal analyst at DAT Freight and

Analytics, which connects trucking firms with shippers.

"All I see is more disruption and tit-for-tat tariffs,"

Croke said, echoing a broadly held sentiment in transportation.

U.S. trucking is in a down cycle that has lasted nearly

three years, the longest and deepest since the global financial

crisis, said Michael Castagnetto, president of North American

surface transportation at C.H. Robinson Worldwide ( CHRW ).

Any new import levies are on a collision course with

stubbornly flat industrial production - a crucial driver of

domestic and international volume from sectors that include

mining, manufacturing, chemicals and electricity - and lingering

overcapacity from the COVID shipping boom, experts said.

Trump's new tariffs on Mexico and Canada, in particular,

would hit one of the rare growth areas for trucking.

The value of cargo that moves between those countries and the

U.S. - which includes finished vehicles, auto parts and avocados

from Mexico as well as steel and lumber from Canada - reached

$88.5 billion in September 2024, up 7.7% from the year-earlier,

according to the U.S. Department of Transportation's Bureau of

Transportation Statistics (BTS).

"Many of our customers - especially automotive customers -

treat North America as one integrated supply chain, with some of

their freight actually crossing both the Mexico and Canada

borders," C.H. Robinson's ( CHRW ) Castagnetto said.

That interrelation makes the U.S. vulnerable to retaliatory

tariffs.

TRANS-BORDER TRADE

Trump's tariff threats could also derail railroad company

plans to switch from cost-reductions and efficiency efforts to

growth, said independent railroad analyst Anthony Hatch.

North American trans-border rail freight was $17 billion in

September, down 5.4% from the year earlier, according to BTS

data, but remains an opportunity for the industry.

Canadian Pacific bought Kansas City Southern for $31 billion

in 2021, merging the companies into an entity known as CPKC and

creating the first railway to link Canada, the United States and

Mexico. The merged companies aimed to capitalize on China's

factory expansion in Mexico, which recently overtook China as

the No. 1 U.S. trade partner.

"While there was rhetoric and headlines, ultimately free

trade in North America increased significantly during the first

Trump term and a new free trade agreement was established," a

CPKC spokesman said.

Union Pacific ( UNP ), which covers much of the U.S. West, also has

connections to and investments in Mexico.

"If it slows down, we have the capability to remove a lot of

costs," Union Pacific ( UNP ) CEO Jim Vena said at a recent investor

conference, referring to any tariff-related demand downturn.