NAFTA Renegotiation Impacts Commercial Trucking
After being in place since 1993, the North American Free Trade Agreement (NAFTA) may be under attack as the American government transitions fully into the Trump Era. Since NAFTA, the transportation and logistics industry has grown by 400% in the sector of cross-border trade. Companies depend on the agreements as they currently stand, and changes to open borders could impact trade, profits, taxes, and more.
2018 Changes to NAFTA Agreements
In 2017, President Donald Trump made several statements concerning NAFTA which indicate future plans to change its agreement. The argument made by the Republicans and Trump specifically is that the United States should decrease the trade deficit via tariffs on imports. Some facts are:
- The renegotiation to NAFTA started in August 2017, they hoped to finish between all three countries by the end of December 2018.
- The seventh round of NAFTA negotiations began on March 5, 2018.
- A 35% tariff on steel and 10% tariff on aluminum was introduced on March 1, 2018.
- The tariffs were imposed to decrease the $55.6 billion in imports from Mexico and vice versa.
In addition, Mexico elects a new president on July 1st, so any agreement reached but not signed prior to that date may need renegotiations.
Impact on Commercial Trucking: Goods
If foreign relations change and we see a decrease in imports to the United States because companies move their dollars from production in Mexico to production in the US. As imports decrease, trucking revenue decreases. In fact, according to Trucking & Transportation News, the trucking industry “stands to lose over $6 billion in annual revenue, which could translate to layoffs until more domestic contracts are secured.”
In a study conducted by the US Bureau of Transportation, it was found the commercial trucking industry moved $91.1 billion dollars of freight per year. With changes to production and manufacturing costs, because of tariffs, there will be a loss in revenue. Unfortunately, there is currently no resolution for the NAFTA negotiations with Canada and Mexico.
Impact on Commercial Trucking: Deliveries
The Trump administration wants tighter restrictions on Mexican truckers able to make deliveries within the United States. Within the past few years, several areas of the country have allowed for delivery just across the border into the United States. President Trump wants to block any deliveries to within the United States from any non-national drivers.
In the past, the Obama administration allowed for deliveries to be made within the US. Borders were kept geographically strict until the past few years allowed for the doors to stay open for certain companies.
The Two Sides of the Deliveries Argument
There are two sides to the argument – one presented by American truckers and one presented by Mexican truckers. If companies are allowed to drive cargo across the border and into states like Utah, South Dakota, Kansas, and the Southern States, Mexican drivers reap all of this business. When countries must transfer the goods at the country border, the United States drivers reap the benefit of the cargo business. Closed borders definitely keeps more American truckers on the road
Keeping an Eye on NAFTA Negotiations
It is guaranteed that NAFTA negotiations and future agreements will impact commercial trucking. Long-standing contracts, withdrawal from production, and even layoffs are all potential realities of NAFTA changes.
Other factors to keep an eye on during negotiations are: off-load charges for cargo, pre-clearance or inspection rules, and shipments being transferred across the United States. While there is no guarantee on the outcome of NAFTA negotiations, the tension in the industry is certain to stay strong until a resolution is reached.