Historically, cross-border trucking freight picks up in March, and this year was no different. However, the future of North American freight hinges on the United States-Mexico-Canada Agreement (USMCA), which is up for review in July.
According to the latest data from the federal government, cross-border trucking freight increased by 5% year-over-year in March. As has been the case for two years, that is, despite a large drop in Canadian freight, Mexican exports and imports again propped up overall North American freight.
Mexican trucking freight jumped by 13%, while Canadian freight dipped by 7%. Since March 2024, Canadian freight has experienced a year-over-year increase in only seven months. Meanwhile, freight coming in and out of Mexico has increased in all but three months. In that 24-month period, overall North American freight decreased in only seven months, thanks largely to increases in Mexican freight.
Cross-border trucking freight typically increases in March as produce season begins, retailers replenish spring inventories, and manufacturing and construction ramp up. This year, top commodities include computer-related freight, electrical machinery and measuring/testing instruments out of Mexico. Top Canadian freight includes computer-related parts, vehicles and electric machinery. All top 15 Canadian commodities fell in March, except for pearls, stones, metals and imitation jewelry.
All eyes on USMCA review
On July 1, trade representatives for Canada, Mexico and the U.S. will begin the formal review process for USMCA, which could shape the future of North American freight.
In 2020, the North American Free Trade Agreement (NAFTA) was replaced with USMCA, which is good for 16 years. Part of the new trade agreement includes a review every six years. The first of those reviews will take place in July.
Essentially, the three countries will decide whether to extend USMCA for another 16 years. All three countries must agree to the extension. If one country refuses, annual reviews will begin until either issues are resolved or the agreement expires in 2036.
USMCA provides investors and manufacturers with something they need: certainty. Major decisions behind building assembly plants and distribution centers can be based on a 10- to 20-year timeline.
If the agreement is extended, that is 16 years of certainty around key supply chain components, such as rules of origin, labor and environmental standards, intellectual property protections, and certain protections from tariffs. That certainty will inform long-term decisions that could keep cross-border trucking freight strong.
Conversely, if the USMCA review hits a snag, investors and manufacturers will be stuck in a state of limbo until an agreement is reached. That may put major supply chain decisions on hold until companies know what to expect long term. For carriers, uncertainty surrounding USMCA could eventually affect freight volumes, border processing times and long-term supply-chain investment decisions.
However, many trade analysts do not expect the USMCA review process to be smooth.
According to the Brookings Institution, U.S. Trade Representative Jamieson Greer told Congress that a renewal is not likely without changes. The Center for Strategic and International Studies predicts a moderate-to-high likelihood of a “painful extension” that includes Mexico and Canada making concessions to reduce U.S. tariffs. The bipartisan, nonprofit policy research organization does not see a clean renewal of USMCA nor does it predict it will just expire.
On Wednesday, May 20, Democratic U.S. senators sent a letter to Greer, urging him to take certain actions during the USMCA review. The senators say that although USMCA is better than NAFTA, it still has not done enough to bring back manufacturing jobs.
Many of the senators’ concerns are about labor enforcement. Specifically, the letter claims Mexico is not complying with labor obligations under USMCA. The senators also want provisions that will prohibit and prevent offshoring as U.S. manufacturing moves to Mexico where workers are getting only $3 to $5 per hour.
The Democratic senators are also concerned about China using Mexico as a backdoor into the U.S. market. Chinese investment in Mexico has more than doubled since USMCA took effect. While companies in China are subject to stiff tariffs, those same companies may gain access to preferential North American trade treatment if production in Mexico satisfies USMCA requirements.
“USMCA, negotiated by the first Trump Administration in partnership with Congress, took important steps to provide market stability and strengthen labor standards. These standards must be viewed as a floor, not a ceiling,” the letter states. “There are urgent issues that must be addressed during the upcoming review in order to ensure workers benefit as promised. We stand ready to work together to support American workers, manufacturing, and the domestic economy.” LL
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