
President Donald Trump issued tariffs on goods from Canada, China and Mexico, prompting knee-jerk reactions from investors. With some of the dust settled, what can truck drivers expect from Trump’s latest trade decision?
On Saturday, Feb. 1, President Trump signed three executive orders issuing a 25% tariff on Canadian and Mexican goods and a 10% tariff on Chinese goods. Energy products out of Canada, including oil, were capped with a 10% tariff.
In response, Canada issued tariffs on $155 billion of U.S. goods. Including tires, vehicles, alcohol, steel/aluminum, consumable goods, appliances, clothing, motorcycles, cosmetics and paper. China indicated it would take “corresponding countermeasures” without further detail. Mexican President Claudia Sheinbaum also announced plans for retaliatory tariffs.
Reactions to the tariffs were swift. On Monday morning, the Dow Jones Industrial Average dropped by more than 600 points, with the S&P 500 down nearly 2%.
Before noon Eastern time, Trump announced that Sheinbaum agreed to send 10,000 troops to the U.S. border. Tariffs are paused for one month while both sides begin negotiations. Canadian Prime Minister Justin Trudeau was scheduled to speak with Trump on Monday afternoon.
Soon after Trump announced the Mexican tariff pause, the Dow Jones regained all early losses, even notching a small gain early afternoon. As of 2 p.m. Central, the Dow was virtually unchanged.
Although the stock markets quickly returned to normal, there is still uncertainty about what the tariffs could mean if they persist. Trucking stakeholders appear to agree that in the long term, they will not be great for truck drivers.
Trucking industry on standby
In the wake of the tariffs being announced, trucking stakeholders are waiting to see what happens in the coming days, bracing themselves for possible further delays in recovering from the freight recession.
The Owner-Operator Independent Drivers Association said the tariffs could make the road to recovery from a prolonged freight recession even longer. However, the Association noted it is too soon to determine what effect they will have.
“Tariffs on America’s trade partners have the potential to inhibit the recovery from a freight recession that has been acutely felt by America’s small-business truckers, but it is too early to make predictions on specific downstream economic effects,” the Association said in a statement. “OOIDA’s trade experts will continue to monitor the effects of these policies as trade negotiations develop and will keep our association members informed.”
The American Trucking Associations issued a similar statement, expressing concerns over increased operational costs for trucking companies.
“As the trucking industry recovers from a years-long freight recession marked by low freight volumes, depressed rates, and rising operational costs, we have concern that tariffs could decrease freight volumes and increase costs for motor carriers at a time when the industry is just beginning to recover,” ATA President Chris Spear said in a statement. “A 25% tariff levied on Mexico could see the price of a new tractor increase by as much as $35,000. That is cost-prohibitive for many small carriers, and for larger fleets, it would add tens of millions of dollars in annual operating costs.”
Hamish Woodrow, head of strategic analytics at Motive, pointed out that shippers and receivers have adjusted supply chain operations in anticipation of the tariffs. Therefore, there should not be any immediate effects on trucking freight.
However, if tariffs are implemented, companies will be forced to shift their supply chain strategy, which will likely be felt in the second quarter.
“Ultimately, the burden of these tariffs will fall on U.S. consumers and retailers. Prices will rise, and businesses will pass along costs as they navigate increased expenses and uncertainty,” Woodrow told Land Line in an email. “Mexico’s role as the dominant trade partner will remain strong, our data showed trade through the Laredo port is up nearly 30% year-over-year, and October 2024 set a record 677,000 truck crossings. But any prolonged disruption could reshape regional supply chains in ways that will be felt for years to come.”
David Spencer, vice president of market intelligence at Arrive Logistics, also noticed an uptick in southbound orders of Canadian commodities late last week. If Canadian tariffs lead to higher fuel prices, Spencer said it could lead to carriers favoring fuel surcharge-protected contract freight since spot rates will be slow to reflect the higher price.
“It’s difficult to predict the long-term effects, but if tariffs were imposed between the U.S. and its neighboring countries, the trucking industry would likely encounter higher costs, logistical hurdles, and changes in trade patterns,” Spencer said. LL
Credit: Source link