Record levels of cross-border trucking traffic between the U.S. and Mexico are seen ahead of the election.

• The USMCA trade deal and nearshoring of operations, including Chinese manufacturers, are driving unprecedented cross-border truck trade between Mexico and the U.S.
• The rise in cross-border trade between Mexico and the U.S. reached a record 52% increase through September, year-to-date.
• Donald Trump, the former president, has stated his intention to renegotiate the USMCA agreement he signed in 2020 and has advocated for a 20% tariff on all goods from all countries, particularly focusing on Chinese manufacturing in Mexico.

The number of cross-border truck transits between Mexico and the United States has reached a record high during an election cycle when tariffs and trade policy are a major issue.

The latest data from Motive shows that cross-border trade between Mexico and the U.S. increased by approximately 52% year-to-date through September, as tracked by trucking visits to North American distribution facilities for the top five retailers.

In August, the number of trucks crossing the border in Laredo, Texas, reached an all-time high. Meanwhile, cross-border truck visits in September 2021 increased by 30% compared to the same month in 2020, setting another record.

"Cross-border trucking traffic will peak in October 2024, and nearshoring of manufacturing operations and trade policies like USMCA are driving this growth, according to Hamish Woodrow, head of strategic analytics for Motive. He predicts that cross-border trade will increase again in early 2025, fueled by nearshoring and increased trade at the Laredo border crossing."

Seasonal restocking spikes at Home Depot and Lowe's, with Halloween marking the beginning of the trend. Woodrow predicts that subsequent waves will occur at Thanksgiving and Christmas.

Woodrow stated that retailers are shifting away from the traditional low-inventory, just-in-time restocking model to prioritize supply chain stability over cost savings. He explained that they are restocking earlier and building extra inventory to protect themselves from unpredictable disruptions.

According to Woodrow, businesses are investing more to meet consumer demand and avoid "stockouts," as evidenced by a 19.7% year-over-year increase in Chinese imports by mid-summer, as reported by Motive.

Since the Trump tariffs were imposed in 2018 and later extended by the Biden administration, the number of Chinese companies establishing manufacturing facilities in Mexico has been consistently increasing.

Xeneta's chief analyst, Peter Sand, stated on CNBC that the increase in demand for container shipping imports from China to Mexico in the first half of 2024 has raised concerns that it may be used as a legal loophole for trade tariff evasion.

Over the past year-and-a-half, the popularity of this route has significantly increased, as stated by him.

Woodrow believes that the increase in Chinese imports is not only due to meeting demand but also reflects a broader shift in supply chain management.

He stated that Mexico's proximity to the U.S. provides more than just convenience; it allows for quicker reaction times and greater flexibility in dealing with unforeseen disruptions, such as labor strikes or geopolitical conflicts that may impact imports from other regions.

Balancing imports from both China and Mexico can help retailers minimize risks and create more resilient supply chains.

During high demand, Chinese imports help maintain inventory stability, while Mexican imports provide a quicker and more flexible option to avoid potential disruption, he stated.

Besides producing goods, food is also a significant commodity that is transported across borders to the U.S., Mexico, and Canada. These countries account for 42% of U.S. food imports, according to Trace One, with beer and bread being their top exports. Additionally, Italy (wine), Chile (salmon), and Brazil (coffee) are also major food and beverage contributors.

Trump's tariffs talk and trade deal threats

The USMCA deal made by former President Donald Trump in 2020 is set to be renegotiated, with a provision requiring countries to review the trade deal after six years starting in July 2026. Chinese manufacturing in Mexico is likely to be a focus of the renegotiation.

Trump's campaign has centered on imposing a 20% tariff on all goods from all countries, and tariffs on Chinese imports ranging from 60-100%.

If Trump wins the election, logistics managers anticipate an increase in import orders before his inauguration to avoid additional tariffs. Woodrow warned that additional tariffs, changes in trade policies like the USMCA, and shortages of imported goods could lead to an increase in the cost of everyday necessities.

Companies are investing heavily in cross-border shipping and seeing the rewards. Uber Freight has achieved $750 million in freight under management to meet the growing demand for cross-border trucking between Mexico and the U.S. The company recorded a 77% year-over-year increase in new cross-border business production from its shipper base, which is supported by a network of multi-mode approved carriers. Uber Freight operates in 75% of Mexican customs ports.

Lior Ron, founder and CEO of Uber Freight, stated that as nearshoring transforms supply chains and cross-border trade expands, their top priority is to provide their shipper partners with the necessary resources and support to succeed in this evolving environment.

Although the Mexico market has experienced growth, the U.S. freight trucking industry has been in a recession for several years. However, recent developments suggest that the industry may be turning around. JB Hunt Transport Services' latest earnings report supports this notion.

"Despite the challenges faced in 2023, Woodrow believes that 2024 will end on a hopeful note. Although the trucking industry was expected to experience growth by November 2024, the slow rebound has been caused by stagnant freight prices and carrier exits."

Woodrow anticipates a moderate growth rate in the first quarter and a long-term growth rate of 5.7% year-over-year to be restored by the end of 2025, but he noted that several factors could affect this forecast, including global macroeconomic weakness, interest rates, and diesel prices.