By Lisa Baertlein

LOS ANGELES (Reuters) – President-elect Donald Trump’s threatened tariffs on top trading partners China, Mexico and Canada would deal a blow to the $1.7 trillion U.S. trucking industry and worsen a nearly three-year trucking recession, industry 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, American businesses.

“Tariffs like the ones proposed will raise prices, and higher prices mean less demand. Less demand equals less shipping,” said Jason Miller, interim chair of the department of supply chain management at Michigan State University’s business school.

Virtually all carriers operating in the United States are exposed to tariff-related revenue declines. The largest include trucking and delivery companies JB Hunt Transport Services and United Parcel Service, as well as rail operators Canadian Pacific Kansas City and Union Pacific.

JB Hunt did not respond to requests for comment and UPS declined comment. The rail operators said they were prepared to respond when and if the tariffs come through.

Trump is keen to use tariffs to create jobs and raise revenue to replace those that will be lost with planned tax cuts, even though those import duties would effectively act as a new tax on consumers, whose spending represents the nation’s most powerful economic driver .

But he also appears to be using tariff threats to force U.S. trading partners to concede on non-trade issues such as border security, economists and transportation executives said. China and other US trading partners have not backed down, saying the tariffs would only serve to hurt everyone involved.

Trump has said he would slap 25% tariffs on goods from Mexico and Canada unless those governments crack down on the flow of immigrants and fentanyl into the United States. He has also promised to add tariffs of at least 10% on top of what has already been imposed on Chinese goods.

The US is the world’s number 1 importer and number 2 exporter. Trump’s threatened tariffs would reduce flows in both directions, said Mary Lovely, a senior fellow at the Peterson Institute for International Economics, who studies the impact of the U.S.-China trade war.

“We expect the new administration to start working right away,” said Lovely, who added that Trump’s new tariffs could start taking effect in the second or third quarter of next year.

TRUMP TARIFFS – THE CONSEQUENCES

Trucking accounts for about a third of US 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 companies with shippers.

“All I see is more disruption and tolls,” Croke said, echoing a widely held sentiment in transportation.

U.S. trucking is in a nearly three-year downturn, the longest and deepest since the global financial crisis, said Michael Castagnetto, president of North American surface transportation at CH Robinson Worldwide.

Any new import duties are on a collision course with stubbornly flat industrial output – a key driver of domestic and international volumes from sectors that include mining, manufacturing, chemicals and electricity – and lingering overcapacity from the Covid-19 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 moving between these countries and the United States — 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 a year earlier, according to the US Department of Transportation’s Bureau of Transportation Statistics (BTS).

“Many of our customers – particularly automotive customers – treat North America as an integrated supply chain, with some of their freight actually crossing both the Mexican and Canadian borders,” CH Robinson’s Castagnetto said.

The interrelationship leaves the US vulnerable to retaliatory tariffs.

BORDER TRADE

Trump’s tariff threats could also derail rail companies’ plans to switch from cost-cutting and efficiency efforts to growth, said independent rail analyst Anthony Hatch.

North American cross-border rail freight was $17 billion in September, down 5.4% from a 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 railroad to link Canada, the United States, and Mexico. The combined companies aimed to capitalize on China’s factory expansion in Mexico, which recently overtook China as the United States’ top trading partner.

“While there was rhetoric and headlines, ultimately free trade in North America increased significantly during Trump’s first term and a new free trade agreement was established,” a CPKC spokesman said.

Union Pacific, which covers much of the western United States, also has ties to and investments in Mexico.

“If it slows down, we have the ability to remove a lot of costs,” Union Pacific CEO Jim Vena said at a recent investor conference, referring to a possible slowdown in toll-related demand.

(Reporting by Lisa Baertlein in Los Angeles; Editing by Matthew Lewis)