Surging US-Canada Trade Tensions Disrupt Cross-Border Freight

The imposition of 25% tariffs on Canadian goods by the United States, effective March 4, 2025, has significantly disrupted cross-border freight. This has led to a surge in truckload volumes and rising spot market rates as businesses expedite shipments to avoid cost increases. The market is experiencing an unprecedented level of volatility, with companies on both sides of the border making strategic moves to secure capacity ahead of the tariffs.

Sharp Increases in Freight Volumes and Rates
Freight data indicates a substantial rise in cross-border shipments. Dry-van spot market volumes from Toronto to Chicago surged 57% in the final week of February, with rates in that lane climbing 7%. Across the board, spot rates for US-bound loads from Canada have increased by 7% since the US election, including a 5% rise in the past two weeks alone. On the return leg, rates for freight moving from the US into Canada have climbed by 18% since the election and 6% in just the last two weeks, marking the highest levels in two years.

This spike in activity is also evident in the data from Loadlink, a major Canadian load board, which reported that 72% of all posted loads in January were cross-border shipments—a sharp deviation from historical norms. Loadlink’s freight index jumped 40% from December to January, while truck capacity in Canada tightened significantly, dropping 29% year-over-year. The imbalance between demand and available trucks is pushing rates higher and creating challenges for shippers seeking reliable transportation.

Industry-Specific Impacts
The automotive industry, which relies heavily on integrated North American supply chains, is among the most affected. Tariffs on parts and vehicles threaten to disrupt production, leading to potential price increases for consumers. Analysts project that car prices in the US could rise by an average of $3,000, with full-size trucks potentially seeing increases of $10,000. These cost hikes could lead to a slowdown in sales and force automakers to reassess their sourcing and production strategies.

Manufacturers in other sectors, including steel, aluminum, and consumer goods, are also seeing an impact. Many companies have ramped up shipments to build inventory before the tariffs take effect, further exacerbating the capacity crunch in trucking. Businesses that rely on just-in-time inventory strategies now face a dilemma: either absorb higher costs or make long-term adjustments to their supply chain models.

Tariff Uncertainty and Strategic Shifts
The uncertainty surrounding trade policies has led to strategic shifts in the logistics sector. Major transportation companies are repositioning themselves to mitigate potential risks. One example is Montreal-based TFI International, which is relocating its legal registration to the US to align with its primarily American operations and shareholder base. Moves like this highlight the broader industry response to an unpredictable regulatory landscape.

On the logistics side, shippers are scrambling to secure capacity as contract rates lag behind the rapidly rising spot market. Many are turning to third-party logistics providers to navigate the volatile pricing environment and ensure continued movement of goods. Some US companies are considering alternate sourcing strategies, including shifting imports away from Canada to avoid tariff-related costs.

The US-Mexico Contrast
Interestingly, freight flows from Mexico into the US have not seen the same level of disruption. While rates have increased, the impact has been less severe. Lanes from Laredo to major US markets like Detroit and Chicago have only seen modest increases of two to four cents per mile in the past week. This difference highlights the relative stability in US-Mexico trade compared to the sharp fluctuations in US-Canada transit.

Navigating an Uncertain Market
With the cross-border freight market in turmoil, businesses must act quickly to secure capacity and manage costs. The volatility in US-Canada shipping conditions underscores the need for proactive logistics strategies to mitigate risk. While shippers have successfully accelerated shipments ahead of the tariffs, future movements remain uncertain, and capacity constraints may persist even after the initial rush subsides.

PNG WORLDWIDE is actively monitoring the situation and has developed contingency plans to assist customers through these market fluctuations. As conditions continue to shift, we remain committed to helping our clients secure reliable solutions. We encourage customers to reach out to discuss tailored strategies to navigate this challenging landscape.