US exempts cross-border freight with Canada, Mexico in ‘Liberation Day’ tariffs

The US exempts goods subject to the USMCA from tariffs under its “Liberation Day” tariff, helping to further boost cross-border trade with Canada and Mexico, especially in the automotive sector.

US Exempts Cross-Border Freight with Canada and Mexico

The US cross-border freight market has received positive news from a series of reciprocal tariffs announced by President Donald Trump at the White House on Wednesday, with an important exception specifically for the United States-Mexico-Canada Agreement (USMCA).

Trump excluded the USMCA from his “Liberation Day” tariff, which imposes a base tariff of 10% on all US trading partners, even up to 49% for some countries. In contrast, USMCA-compliant goods – that is, products whose origin or components are solely from Canada, Mexico, or the United States – will not be subject to tariffs.

This exception continues a policy that has been in place since early March, when a 25% tariff was imposed on non-USMCA-compliant goods – that is, products made in Canada and Mexico that do not meet the USMCA rules of origin to qualify for preferential tariffs.

The 25% tariff was originally scheduled to apply on Wednesday to USMCA-compliant goods as well, but under the latest executive order, these products will be exempted indefinitely.

“It’s possible we will we see a dip in trade volumes now that we’re on the other side of this reciprocal tariff announcement, and we’re preparing for that, but we’re also heartened that Canada and Mexico did not get the brunt of this announcement,” Garrick Taylor, a spokesperson for the Border Trade Alliance (BTA), told FreightWaves.

BTA is a nonprofit that advocates for trade and border infrastructure in the Americas. Its board of directors includes executives from the American Freight Transport Association (ATA), Ryder Supply Chain Solutions, and BNSF.

Taylor noted that when the tariffs on Canada and Mexico were announced earlier this year, there was a spike in cross-border traffic as importers rushed to get their goods in before the tariffs increased.

“We would have preferred an increase in trade volumes generated out of thriving North American freight markets and not because importers were trying to play ‘beat the clock’ with tariffs.”

Will the auto industry benefit?

Trump’s exemption from USMCA means that a large volume of imports into the US by road and rail – primarily in the auto sector – will continue to flow without the added costs of tariffs on goods from markets outside the region, transported by sea and air.

According to the ATA, U.S. trucking companies are expected to generate $17.73 billion in trucking trade with Canada ($7.86 billion) and Mexico ($9.87 billion) in 2023.

“With the success of USMCA and the growing trend of nearshoring, 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,” ATA President and CEO Chris Spear warned before Trump announced the USMCA exemption in March.

“Not only will tariffs reduce cross-border freight, but they will also increase operational costs,” Spear said. “The price tag of a new truck could rise by up to $35,000, amounting to a $2 billion annual tax and putting new equipment out of reach for small carriers. The longer tariffs last, the greater the pain for truckers as well as the families and businesses we serve.”

In 2024, U.S. railroads will handle an estimated $203.1 billion in cross-border trade, with $104.8 billion in trade between the U.S. and Canada (66% imports, 34% exports) and $98.3 billion in trade between the U.S. and Mexico (65% exports, 35% imports).

“Railroads play a critical role in connecting American industries, small businesses and farmers to global markets and helping drive economic activity across the nation,” a representative for the Association of American Railroads told FreightWaves via email.

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