Consultant’s Insight: Mexican, Canadian investments threatened by potential 25% tariff

Throughout his presidential campaign, President-elect Donald Trump was vocal about using tariffs as the basis of his economic and political strategies. Tariffs will help bring more manufacturing back to the United States and will also be used to punish rival countries, according to Trump. While much of the tariff talk was aimed at China, in a surprise move this week, Trump threatened 25% tariffs on the U.S.’s closest neighbors: Canada and Mexico. “On January 20th, as one of my many first Executive Orders, I will sign all necessary documents to charge Mexico and Canada a 25% Tariff on ALL products coming into the United States, and its ridiculous Open Borders,” Trump posted on Truth Social, Trump’s social media platform. Tariffs would go into effect Jan. 20 and “will remain in effect until such time as Drugs, in particular Fentanyl, and all Illegal Aliens stop this invasion of our Country!” Trump wrote in a separate post. It remains to be seen whether Trump will follow through on his threat. In the meantime, shippers are left scratching their heads about what to do. U.S. trade with neighbors [caption id="attachment_57146692" align="alignright" width="298"] Cathy Roberson, Cargo Facts Consulting senior consultant and Cargo Facts columnist[/caption] Canada’s market is mature and often viewed as one with higher operating costs. Mexico, however, has become a part of many shippers’ China Plus One strategies by diversifying a percentage of their sourcing to Mexico because of its lower costs. Brands employing China Plus One strategies diversify their production away from China . From January through September of this year, private companies announced their plans to invest more than $64.7 billion in Mexico, according to Mexico’s Secretariat of Economy. The U.S. accounted for 46% of the announcements, followed by companies from Germany with 11% and Spain with 8%. U.S. imports from Mexico year-to-date through September were $379 billion, up 6.5% from the same period in 2023, according to the U.S. Bureau of Transportation Statistics. U.S. imports from Canada, however, fell almost 20% year over year to $309 billion for the same period. While most of the trade between the three countries is conducted via trucking and rail, air still plays an important role for high-value goods such as electrical parts and machinery. For example: Lufthansa Cargo added flights between Frankfurt (FRA) and Monterrey (MTY) in June to support Mexico’s growing number of automotive suppliers, electronics providers and those moving medical products. UPS announced the acquisition of Mexican express delivery company Estafeta , including a fleet of six aircraft , in July. Air Canada added a fourth weekly freighter flight to Mexico City’s Felipe Angeles International Airport (NLU) earlier this year. USMCA status The U.S.-Mexico-Canada Agreement (USMCA) is the successor trade deal to 1994’s North American Free Trade Agreement (NAFTA). During Trump’s first term in office, NAFTA was renegotiated and the USMCA was signed into law early in 2020. Trade among the U.S., Canada and Mexico has grown almost 28% since 2018, when the countries began to renegotiate NAFTA, and reached $1.6 trillion in 2023, according to U.S. government data. However, the agreement is in jeopardy. A review of the USMCA by the three countries in July 2026 may see either a completely revised version or, worst-case scenario, the end of the agreement. Consumers will pay the price Air cargo carriers and forwarders discussed the potential impact of new tariffs at the TIACA Air Cargo Forum in Miami this month. “It’s been done before and we didn’t see wide issues,” United Cargo President Jan Krems said. Indeed, it has been done before, but, like so many other carriers and forwarders said at the conference, they move the goods and, at the end of the day, shippers will continue to import goods. But, for most shippers, they will pass tariff costs on to consumers. Will consumers be willing to pay for such goods? American consumers could lose between $46 billion and $78 billion in spending power each year if new tariffs on imports to the U.S. are implemented, according to the National Retail Federation. For now, shippers will probably take a wait-and-see approach to what the Trump administration may bring. But, in the meantime, supply chains will need to be flexible to address the unknown, the uncertainty and the what-if of the new administration. Register now for Cargo Facts' essential regional events for industry stakeholders: Cargo Facts LATAM 2025 on Feb. 10-11 at the Pullman Sao Paulo Guarulhos Airport in Brazil; Cargo Facts Asia 2025 on March 24-26 at the W Shanghai in China; and Cargo Facts EMEA 2025 on May 6-8 at the Shangri-La Bosphorus in Turkey.

Consultant’s Insight: Mexican, Canadian investments threatened by potential 25% tariff

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