Mexico's growth & Canada's freight imbalance
U.S.–Mexico
Cross-border carriers are gearing up for another challenging year in 2025. In 2024, carriers faced significant financial challenges for cross-border transportation—operating costs surged by an estimated 20%, as reported by CANACAR in Mexico.
This drastic increase was caused by several factors:
- Fuel prices: Diesel prices rose by 6.33%, with an average price of $25.71 pesos per liter by the end of 2024. Reduced government fiscal incentives compounded the issue, driving costs higher.
- Spare parts: Vehicle maintenance and spare part costs experienced similar increases, heavily impacting carriers' budgets. These increases were largely caused by inflation and the strengthening of the dollar over the peso.
- Security and delays: Rising cargo theft and road blockades/delays forced companies to invest in security measures and increase fuel consumption, elevating operational expenses.
Cross-border shipping in 2025
Looking ahead, carriers expect these cost pressures to persist, prompting an even greater focus on cost control and operational efficiency. With digitalization offering potential solutions for process optimization, carriers are poised to navigate 2025’s uncertainties with a blend of innovation and resilience.
The holiday season and start of the new year represent a particularly challenging time for the cross-border transportation industry. During this period, increased transit times, weather events, and a higher incidence of accidents become critical factors, especially on busier roads. Added to this is the shortage of operators, as many choose to take vacations, limiting the industry’s ability to react to urgent loads, particularly for loads that require teams of operators.
Digital driver’s licenses
Beginning in 2025, Mexico’s cross-border carriers will transition to digital truck driver’s licenses. Although this change aims to modernize the government’s system, shippers continue to require physical licenses to comply with security measures. This difference generates problems for drivers when accessing certain facilities. Combined with high-season pressures, carriers are in a complex position and seeking immediate solutions to meet delivery times and market expectations.
Industrial real estate situation
The industrial real estate market in Mexico, specifically Tijuana, Monterrey, Guadalajara, and Mexico City, was still busy as 2024 concluded, largely driven by demand across manufacturing, logistics, and electronics sectors.
Tijuana focuses on aerospace and medical industries, while Monterrey leads in automotive and logistics, and Guadalajara mirrors Tijuana's sector mix.
Mexico customs snapshot: 2024 in review
From January to September 2024, total foreign trade operations increased by 2.7%, with border customs seeing a 1.6% rise. The customs offices of Nuevo Laredo, Tijuana, and Ciudad Juárez carried out 61.0% of total border customs operations, making them the three most significant crossing locations.
At Mexican airports, customs operations rose by 3.8%, with Guadalajara, Monterrey, and Mexico City accounting for 52.2% of airport-related activities. Maritime customs operations grew by 6.8%, led by Manzanillo, Veracruz, Lázaro Cárdenas, and Altamira, which handled 85.5% of maritime operations. All figures compare to the same period in 2023.
Mexico´s Secretary of Economy announced new measures to protect Mexico's textile industry. A decree was signed to temporarily increase tariffs to 35% on 138 textile product categories to combat underpriced imports and misuse of the Manufacturing Industry, Maquila and Export Services (IMMEX) trade facilitation program. This decree does not apply to goods imported from countries with which Mexico has a trade agreement.
Port Manzanillo expects a historic record
The Port of Manzanillo was on track to reach a record-breaking 4 million TEUs of cargo movement by the end of 2024, driven by imports of consumer goods and manufacturing products. As Mexico's largest port on the West Coast, Manzanillo handles approximately 42% of the country's containerized cargo, achieving a 7.9% increase in general cargo from January to September 2024.
Mexico 2025 outlook
The American Chamber of Commerce (AMCHAM) projects a positive economic outlook for 2025, with growth in foreign direct investment (FDI) and exports despite tariff threats from U.S. President-elect Trump.
Key opportunities lie in the substitution of Chinese components in the automotive sector, offering North American small and medium sized companies a chance to integrate into global supply chains with government support.
Investments are expected to prioritize Tier 1 and Tier 2 suppliers, opening co-investment opportunities in automotive components. While short-term financial impacts on companies’ finances are likely with proposed tariffs, Mexican exports are poised to benefit from increased U.S. demand as companies shift sourcing from China. Regional trade integration remains crucial to compete with China's advanced supply chains.
U.S.–Canada
The Canadian transportation market is currently influenced by a complex web of forces pushing and pulling on supply and demand.
On the demand side, factors like political uncertainty (tariffs), favorable tax policies, and interest rate reductions are stimulating short-term growth. However, the low Canadian dollar and the seasonal lull in Q1 present challenges.
On the supply side, new equipment availability and a potential increase in entrants to the market offer opportunities, but winter weather and the seasonal nature of the driver workforce diminish supply. For carriers, the imbalance of freight flows and seasonal staffing challenges presents both opportunities and risks.
In the short term, carriers might face a volatile environment with both high demand and constrained supply, especially in regions like Alberta and British Columbia. Managing these factors effectively will be key to staying competitive.
The freight market remains generally soft, with tightness from the Canadian West Coast to western Canada due to seasonal freight moves and a lack of outbound loads from the United States. Holiday-related congestion continues through the early part of January.
Canada postal workers strike
The national strike by the Canadian Union of Postal Workers between November 15–December 17, 2024, led to the suspension of international mail acceptance to Canada by United States Postal Service (USPS), severely disrupting mail processing and delivery.
On December 23, 2024, USPS issued the following statement, implying that impacted shippers should continue to monitor this situation throughout January 2025, “USPS suspension of acceptance of mail and packages bound for Canada remains temporarily unchanged as we monitor Canada Post’s progress as they process the volumes that were staged during the strike.
We anticipate reopening acceptance of Canada bound volume within the next two weeks and we appreciate our customers patience as we continue to monitor developments in Canada.” Check the USPS website for the latest information regarding the status of this service suspension.
Forces increasing demand
1. Political near-term threat of tariffs
Companies are proactively shipping goods ahead of the anticipated tariff increase on January 20, which creates a surge in demand. The fear of tariffs can lead to stockpiling early shipments to avoid higher costs, which increases short-term demand in transportation.
2. Canadian GST/HST holiday (December 14–February 15)
This tax relief period incentivizes consumers and businesses to make purchases now, boosting demand for the transportation of goods, especially food and other products eligible for savings. This likely pushes up freight volumes.
3. Continued interest rate reductions
Lower interest rates tend to stimulate economic activity by making borrowing cheaper. As businesses and consumers take on more debt for spending or investment, transportation demand increases. Specifically, this could support growth in industries like construction, retail, and manufacturing, all of which rely heavily on transportation.
4. Geography and cold Canadian weather
The demand for heated and temperature controlled trailers spikes as colder weather arrives, particularly in Canada’s winter months. With the freezing temperatures, temperature sensitive goods like produce, pharmaceuticals, and electronics require special handling and equipment, leading to increased demand for these specialized services.
Forces decreasing demand
1. Potential threat of tariffs
If tariffs were to rise significantly, like the proposed 25% tariffs, it could dramatically reduce Canadian exports to the United States. This is especially impactful given the trade volume of $3.6 billion a day between Canada and the United States. A trade downturn would decrease freight volumes, particularly for cross-border shipments.
2. Low Canadian dollar
A weaker Canadian dollar makes imports more expensive, which could lead to reduced demand for inbound goods. As companies face higher costs for U.S. imports, they may cut back on importing goods, thereby reducing freight volumes on both the inbound and outbound shipments.
3. Seasonal lull (Q1 slowdown)
Historically, the first quarter tends to be slower due to post-holiday consumer behavior, winter weather, and lower retail traffic. The combination of low consumer activity and challenging weather conditions leads to reduced demand for transportation services, which affects volumes, especially in sectors like retail and construction.
Forces increasing supply
1. New and used equipment availability
The availability of equipment, both new and used, could encourage new entrants into the Canadian transportation market. Additionally, stable equipment prices provide less financial risk for current operators looking to expand their fleets or replace older equipment.
Forces decreasing supply
1. Lower freight volumes and potential bankruptcies
Lower freight volumes in Q1 and beyond could lead to financial strain on carriers, potentially causing bankruptcies. If freight volumes are inconsistent or too low to cover operating expenses, some companies might exit the market, leading to less supply and potentially reduced competition in the sector.
2. Winter weather
Weather conditions, especially winter storms and icy roads, can slow down transit times and reduce the number of trips drivers can make. This is particularly severe in regions like Alberta-British Columbia and in areas crossing the Canadian Rockies, where the weather is extreme and can impact supply chains.
3. Driver shortage/seasonal absenteeism
There has been a noticeable change in the demographics of truck drivers over the last decade, and many drivers opt to return to their home countries during the winter months, further exacerbating the seasonal lack of drivers in Q1. Additionally, with the holiday season always leads to reduced staff, which leads to reduced capacity.
4. Challenges in sourcing heated/temp controlled equipment
As more customers seek protection from freezing temperatures, the increased demand for heated and temperature controlled trailers can make this specialized equipment harder to source. There is a strain on both demand and supply as operators that do not already have access to the right equipment may find it harder to secure it in a competitive market.
Carrier observations
Freight imbalances
The imbalance between southbound and northbound freight is creating higher southbound costs, particularly as the flow of goods from the United States to Canada is more readily available than the reverse. This could drive up costs for Canadian businesses trying to export goods to the United States, further exacerbating concerns about tariffs.
Driver recruitment
Carriers are experiencing less difficulty recruiting drivers, with many owner-operators seeking stable work and more consistent pricing. This is likely a reaction to fluctuating demand and market volatility. The trend of owner-operators joining larger fleets could help alleviate some pressure on the driver shortage.
Holiday staffing and driver vacations
During the holiday season, many carriers reduce staff in anticipation of lower demand. However, there is a notable impact on driver availability in January and February, as drivers take extended vacations, leading to reduced capacity at a time when seasonal factors already reduce transportation demand.