President-elect Donald Trump intends to impose 25% tariffs on Mexican and Canadian imports starting January 20, 2025. Trump announced his plan via social media, promising to sign an executive order on his first day in office. This was reported by the railway transport news portal Railway Supply.

Trump tariffs would put cross-border rail traffic in the crosshairs
Bound for Mexico, Kansas City Southern SD70ACe No. 4019 and ES44AC No. 4686 lead a loaded grain drag between the Co-Op rice dryers and grain elevators at El Campo, Texas, on Aug. 11, 2019. Tom Kline

Trump’s Plan to Impose Tariffs on North American Imports

These tariffs threaten to disrupt cross-border rail traffic, a critical growth area for North American railroads. Canadian Pacific Kansas City (CPKC), the only railroad connecting Canada, the U.S., and Mexico, faces significant exposure. In 2023, 41% of CPKC’s $8.9 billion revenue stemmed from cross-border trade.

CPKC CEO Keith Creel emphasized the interdependence of North American trade during a recent RailTrends conference. Creel noted that trade between these nations grew by 20% during the USMCA negotiations despite initial aggressive rhetoric. Since 2020, near-shoring has further strengthened Mexico’s role in supply chains.

How Trump’s Tariffs Could Impact Railroads and Trade?

Union Pacific (UP) also relies heavily on cross-border traffic, with 11% of its volume tied to Mexico. In 2023, UP’s Mexican shipments were 59% automotive and intermodal, 21% bulk goods, and 20% industrial products. Automotive and intermodal traffic dominate northbound trade, while southbound shipments include auto parts and metals.

Canadian National Railway’s cross-border traffic represented 32% of its $11.9 billion revenue in 2023. Its trade spans multiple sectors, including petrochemicals, automotive, and forest products. Mexico’s share of Union Pacific’s 891,000 loads highlights its strategic importance for rail growth.

Eastern railroads like Norfolk Southern and CSX also view Mexico as a key growth market. They anticipate increased intermodal, automotive, and forest products traffic through partnerships like the Alabama interchange with CPKC. Mexico’s importance to rail strategies is underscored by $1.5 billion revenue synergies CPKC targets by 2028.

Analyst Cherilyn Radbourne predicts short-term trade acceleration as shippers aim to avoid proposed tariffs. However, sustained tariffs could harm cross-border volumes, disrupting supply chains and increasing costs. Independent analyst Anthony B. Hatch warns that Trump’s trade policies risk igniting retaliatory tariffs from Canada and Mexico.

Mexican President Claudia Sheinbaum vowed to impose tariffs on U.S. goods if Trump’s policies proceed. Analysts argue that U.S. agricultural exports would be hit hardest, potentially triggering domestic lobbying against the tariffs. Loop Capital Markets analyst Rick Paterson said agriculture’s vulnerability makes it a prime target for retaliation.

Supply chain expert Jason Miller foresees severe impacts on the auto industry, which relies on $200 billion in annual cross-border trade. The U.S. also imports 70% of its crude oil from Canada and Mexico, making fuel prices susceptible to disruption.

Trump’s tariff plans could drastically alter North American trade dynamics. While railroads like CPKC and Union Pacific seek to capitalize on growth opportunities, proposed policies threaten to complicate cross-border commerce. Policymakers and industries must weigh these challenges carefully.

Source: www.trains.com

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