President Donald Trump’s “America First” trade policy promises to be more aggressive against foreign competitors. During his first two weeks as president, Mr. Trump has already withdrawn the United States from the Trans Pacific Partnership agreement, which Ex–President Obama spent the last 7 years negotiating. Further dismantling Obama’s legacy, Trump revived the Keystone XL pipeline and expedited another pipeline in the Dakotas, which Obama also opposed. Trump is also beginning to reverse the Affordable Care Act and has made changes to housing and economic policy.
This aggressive trade policy directly affects the U.S., Mexican, and Canadian trucking industries. For example Mr. Trump is proposing to renegotiate and possibly cancel the North American Trade agreement, also known as NAFTA, as well as proposing border adjustment, which could impose a 20% tax on imports from Mexico and impose up to a 10% tariff increase on all other foreign imports. These proposed changes are a major concern to the North American trucking industry because it has greatly benefited from NAFTA due to the gradual increase on demand of imported goods, about 5.5 million crossings in 2015 representing $89 billion. The reality is that the global supply chain is very sophisticated. The trucking industry is highly integrated with it because auto parts are made in Canada and the vehicles are assembled in Mexico, which are then transported to the U.S. consumers etc. Because of this administration’s extreme proposals, North American Industry should be very wary of any closure of trade with the southern border, as losing NAFTA would mean a pure loss of demand.
If the Trump administration moves forward with its trade proposals, it would set off a series of legal actions in adjudication panels in NAFTA, the World Trade Organization (WTO), as well as in U.S. and Mexican courts, causing disruption to the trucking industry’s legal ability to move freight across borders. This may possibly provoke retaliation from the Mexican government, creating an unnecessary trade war. If approved by Congress, these proposals will be challenged by lengthy legal battles that could take years to resolve.
For now, any trucking companies that import products from Canada and Mexico or trucking companies that depend on international trade should be concerned about the direction that the Trump administration is heading.