Shippers are expediting freight due to Mexico, Canada tariff caution

Despite the delay in tariff action, shippers remain wary of the affordability of importing from Mexico and Canada. Some companies are moving their goods ahead of schedule to avoid the expenses of potential Trump tariffs.

“Our customers are bracing,” Jose Guerrero, director of U.S. customs operations for Uber Freight, told FleetOwner. “This month, there’s going to be a surge in volumes.”

The tariff story so far

On the campaign trail, Donald Trump suggested a 20% tariff on all imported goods, a 60+% tariff on Chinese imports, and a 100% tariff on cars from Mexico. Once he won the election, shippers began to prepare for possible tariffs.

On January 20, Trump said he would enact 25% tariffs on Canadian and Mexican imports and 10% tariffs on Chinese imports by February 1. That day, the president announced that the tariffs would take effect February 4, prompting concern and condemnation from trucking industry groups.

Within hours of the effective date, the president secured negotiations with leaders of Canada and Mexico to postpone the tariffs for at least 30 days. The North American trade conflict earned a brief reprieve, but China instead issued its own retaliatory tariffs against U.S. imports.

Uber Freight found that its customers importing from Mexico are moving loads early, preferring the costs of inventory storage or heightened freight rates to the risk of a 25% tariff. That surge in shipper demand could bring an earlier peak shipping volume than usual.

Shippers want to move freight early

A 25% fee on imports is expensive. If the North American tariffs take effect, a shipper would find that their $50,000 shipment suddenly costs an additional $12,000 to move from Mexico to the U.S. Shippers have good reason to do what they can to avoid the expense.

Companies already began front-loading freight before Trump’s inauguration. Earnings reports showed that many major shippers moved extra cross-border loads ahead of potential tariffs, according to Reuters and CNBC. Similarly, C.H. Robinson’s Mike Short recently wrote in the company’s blog that front-loading freight can be an effective tactic ahead of disruptions like the pending tariffs. Short wrote that he expects shippers’ front-loading trends to continue.

According to Guerrero, Uber Freight was proactive and began conversations with its shippers in December.

“A lot of them were asking, ‘Is it going to come through or not?’ And, at the time, we couldn’t tell them yes or no, but it seemed that there was a possibility,” Guerrero said. “So we started having conversations with our customers and preparing them for it.”

Guerrero compared the trend to shippers’ preparations for Trump’s 2018 tariffs. “Shippers started getting all their freight out as soon as they can to avoid these types of scenarios… It is typical behavior,” Guerrero said.

Uber Freight also found that, with the approach of the February 1 announcement, “we started seeing an incremental increase in volumes to the port at the southern border,” Guerrero said.

Transpacific freight rates face unpredictable market

Trump’s 10% tariffs against Chinese imports are already affecting businesses, but it isn’t yet clear how they will shape transpacific freight rates down the line, as Modern Tire Dealer reports.

“There are too many moving parts to give predictions with any confidence,” Simon Heaney, senior manager of container research for shipping consultant Drewery, told MTD.

The expert told MTD that shipping rates are falling right now for unrelated structural reasons; countries that replace Chinese imports could face new duties; and America’s purchasing power could be damaged in the long term. All these circumstances could alter the supply-demand dynamics of international shipping in unpredictable ways.

Tariff risks still present in North America

After Mexico and Canada reached a deal to postpone the tariff threats, Guerrero found that the company’s shippers felt some relief.

“Our customers seem to be a little bit more relaxed,” Guerrero said. “They don’t feel as pressured because of the deadline that was looming.”

However, the threat of higher duties still looms. A lot of shippers still plan to move inventory before tariff talks return, Guerrero said, even if they have to endure additional costs.

The surge in demand may challenge local carrier capacity, pushing up freight rates for some routes or loads.

However, shippers do have options besides higher freight rates, Guerero said. They can work with Mexican drivers using B-1 visas, transload shipments at the border, or use a Customs bonded warehouse or foreign-trade zone.