The US government may have suspended tariffs on imports from Canada and Mexico after two days, but the trucking industry is already feeling the pain.
Orders for new trucks have slumped amid signals that the sector’s nascent recovery may be stalling.
Last Tuesday, when tariffs kicked in, before their suspension on Thursday, trucker organisations on both sides of the Canada-US border sounded the alarm.
The Canadian Trucking Alliance (CTA) warned that its members faced “the worst freight economy in 40 years”, and that the US tariffs on imports from its northern neighbour could “devastate” Canada’s trucking sector.
“Widespread tariffs on our customers’ freight to US suppliers and consumers will have shocking effects on our membership and the overall supply chain,” predicted CTA president Stephen Laskowski. “The longer these tariffs are applied, the more strain there will be on carriers, which will lead to jobs losses and permanent closures of fleets.”
Some Canadian trucking firms had already begun to lay off staff in anticipation of customers cancelling orders, CTA reported. A survey of carriers in Ontario indicated one in three fleets had reported lay-offs.
“With the success of USMCA and the growing trend of near-shoring, the North American supply chain has become highly integrated and supports millions of jobs. Imposing border taxes on our two largest and most important trading partners will undo this progress and raise costs for consumers.
“The 100,000 full-time hardworking truckers hauling 85% of the surface trade in goods with Mexico and 67% of the goods traded with Canada will bear a direct and disproportionate impact,” warned CTA CEO and president Chris Spear.
In the US, the American Trucking Associations (ATA) warned of a hit on consumers as well as truckers, the latter facing a disproportionate impact.
In addition to lost business, trucking firms face border delays and increased operating costs as well as shifts in freight volumes and route adjustments, according to Project44.
The outlook for the US economy has darkened and tariffs would take a toll on consumer confidence. The Tax Policy Center estimates that tariffs on imports from Canada and Mexico would reduce annual after-tax income for US households by $930.
According to the Peterson Institute for International Economics, the combined impact of US tariffs on China, Mexico, and Canada would raise the annual tax burden for a typical US household by $1,200.
The construction sector has already shown signs of stress. Construction spending fell short of projections in January with a 0.2% retreat from December. The new tariffs on steel and aluminium imports and the rise of the levy on timber to 25% from 14.5% bring additional upward cost momentum to the sector and push house prices up further.
US manufacturing ended a two-year slump in January, with the PMI climbing to a reading of 50.9, but this slowed to 50.3 in February.
Truckers did actually enjoy a spike in rates for cross-border moves, as cargo owners scrambled to bring in goods ahead of tariffs. Spot rates from the US to Canada jumped to two-year highs in the weeks ahead of the 4 March tariff implementation.
Now the uncertainty over tariffs is forcing companies to postpone investments and wait for better visibility, which suggests that the recovery of the trucking sector is back in the slow lane.
“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,” the Owner-Operator Independent Drivers Association warned.
Orders for new trucks are already down. Numbers from FTR Transportation Intelligence show preliminary Class 8 truck orders in February down 31% on January and 38% year on year
FTR senior analyst Dan Moyer said that around 45% of all Class 8 trucks built for the US and Canadian markets would be subject to the tariffs and would also be affected by the levies on imported steel and aluminium.
“Not only will tariffs reduce cross-border freight, but they will also increase operational costs. The price tag of a new truck could rise by up to $35,000, amounting to a $2bn annual tax, putting new equipment out of reach for small carriers,” ATA’s Mr Spear noted.