How a North American Trade War Would Reshape the Shipping Industry

Even with the 30 day negotiation period being announced on Monday & Tuesday for Mexico and Canada respectively, the possibility of a North American trade war is no longer just a hypothetical—it’s a scenario that businesses, logistics providers, and policymakers must seriously consider. With the United States, Canada, and Mexico deeply intertwined through trade agreements such as the United States-Mexico-Canada Agreement (USMCA), any disruption could send shockwaves through supply chains, freight transportation, and manufacturing.

In 2022, North American trade totaled over $1.5 trillion, with cross-border freight between the U.S. and Canada alone accounting for $828 billion and U.S.-Mexico trade reaching $779 billion (U.S. Census Bureau). The reliance on seamless supply chains between these three nations has driven economic growth, but if tariffs, sanctions, or retaliatory measures are imposed, the entire logistics landscape could be altered. A North American trade war would not only affect industries but also reshape the flow of goods, impacting trucking, rail, ocean freight, and air cargo.

If a trade war erupts, tariffs would be the first major disruptor. Higher import duties would increase the cost of raw materials and finished goods, forcing manufacturers to reconsider their supply chains. In industries like automotive, aerospace, electronics, and agriculture, which rely heavily on cross-border trade, these additional costs could lead to production slowdowns, price increases, and even factory closures. Carlos Ortega, a logistics analyst specializing in North American trade, explains that “if tariffs rise between the U.S. and Mexico, expect a dramatic slowdown in the automotive supply chain. Roughly 40% of the parts in a U.S.-assembled car come from Mexico. If that cost rises, manufacturers will have to look elsewhere—or pass the costs onto consumers.” The projected industry impact of a 10% tariff increase would be severe. Automotive costs could increase by $3,000 to $5,000 per vehicle, affecting both manufacturers and consumers. The price of smartphones, computers, and other tech products could rise by 8-15% due to disrupted supply chains, while U.S. farmers, who exported $28 billion in goods to Mexico in 2022, would see a sharp decline in demand for American grain, dairy, and meat products. Supply chain costs for clothing, furniture, and household goods could also rise, leading to slower inventory turnover and higher retail prices.

If a trade war reduces demand for North American trade, it will directly affect freight transportation, particularly in over-the-road (OTR) trucking and intermodal rail. Trucking moves approximately 70% of all freight in North America, with $460 billion in goods transported between the U.S. and Canada and $460 billion between the U.S. and Mexico in 2022 (Bureau of Transportation Statistics). A trade war would likely lead to a 5-10% decline in cross-border truckload volumes, forcing carriers to compete more aggressively for domestic freight. Sarah Lennox, VP of Operations at a major U.S. freight brokerage, warns that “for companies that specialize in cross-border logistics, a trade war would be devastating. Even a slight dip in demand could push smaller carriers out of business.”

Intermodal freight, particularly rail shipments between Canada, the U.S., and Mexico, has grown significantly due to lower costs and environmental benefits. However, if tariffs disrupt trade, rail volumes could decline by 10-15%, especially in sectors like automotive and agriculture. Some experts believe intermodal could gain traction if businesses seek lower-cost transport alternatives. John Peterson, a logistics strategist at a North American rail company, explains that “rail remains the most cost-effective mode for long-haul shipments. If tariffs force companies to reduce trucking costs, we could see a shift toward increased rail usage—especially between the U.S. and Canada.”

Mexico has long been the manufacturing backbone for North American industries, with major corporations relying on its lower labor costs and skilled workforce. However, if a trade war forces companies to rethink their production locations, Mexico’s $300 billion manufacturing sector could be at risk. Some U.S. businesses may look to nearshoring—moving production back to the United States to avoid tariffs. Others may shift to Asian markets, increasing demand for ocean freight from China, Vietnam, and India. This could place higher pressure on U.S. ports, particularly on the West Coast, which is already facing capacity constraints. Carlos Ramirez, a senior trade consultant in Mexico City, warns that “a shift in manufacturing away from Mexico could disrupt supply chains for years. It took decades to build the infrastructure that supports North American trade. Moving factories elsewhere isn’t as simple as flipping a switch.”

If North American trade routes shift, U.S. and Canadian ports will feel the impact. A surge in goods from Asia and Europe could create new congestion challenges at ports like Los Angeles, Long Beach, Vancouver, and Houston. Potential ocean freight changes include increased container demand for Asian goods, leading to higher shipping costs, higher reliance on East Coast ports as companies seek alternative entry points, and port congestion in Mexico’s Manzanillo and Veracruz ports if companies use ocean routes instead of cross-border trucking. Anthony Chang, a supply chain expert, explains that “we’ve already seen how disruptions in supply chains can cripple port operations. If a trade war shifts more goods toward maritime transport, expect delays, rate hikes, and logistical bottlenecks.”

Beyond transportation, a trade war would bring stricter customs regulations, leading to longer wait times at borders and increased compliance costs. Companies importing and exporting across North America would face greater scrutiny, requiring more detailed documentation and higher brokerage fees. This shift would increase demand for customs brokerage services, but also slow down supply chains—forcing shippers to adapt their timelines and budgets accordingly.

While the risk of a trade war remains uncertain, shippers, carriers, and logistics providers must be proactive in preparing for potential disruptions. Diversifying supply chains to reduce reliance on any single trade corridor, exploring nearshoring or reshoring options to mitigate tariff risks, investing in customs expertise to navigate regulatory changes, and optimizing freight networks to balance costs and efficiency in shifting trade patterns are all necessary strategies for survival.

A North American trade war could be a defining moment for the logistics industry, reshaping trade flows, altering freight demand, and forcing companies to rethink long-standing strategies. Whether it happens or not, the time to prepare is now, reach out to your Journey Freight Broker for any questions you may have!