Rapid Impact Analysis - 25 March 2025
Tariffs Impact on Trucking Industry: What We Know So Far
By Andrej Divis
Article Summary
Combined with the immediate retaliatory actions of Canada and Mexico, the 25% tariffs’ impact on the trucking industry could be significant.
- Highlights
- Tariffs Impact on Trucking Industry: A 25% Tariff Would Potentially Affect One-Third of US Commercial Vehicle Sales
- US New Registrations of Class 4-8 Trucks and Buses by MHCV OEM Brand (2024)
- Major Supply Chain Disruptions Expected Alongside Tariffs
- Impact of Tariffs on Commercial Truck Prices
- How Long Will Trucking Industry Tariffs Last?
- Commercial Vehicle Forecast Updates
Highlights
- New automotive tariffs are expected on multiple US trading partners, including Canada and Mexico, from April 2. The automotive duties on Canada and Mexico have been delayed twice since the beginning of the year, most recently in early March 2025, when USMCA-compliant vehicles were exempted from the 25% duties imposed in March. At this time, it is not known whether or not an exemption will be in place for USMCA-compliant vehicles as of April.
- These duties follow tariff increases earlier this year on imported goods from mainland China as well as increased tariffs on imports of steel and aluminum from sources worldwide.
- With almost half of US Class 8 heavy truck sales produced in Mexico, all else equal, the proposed 25% tariffs on Mexico would influence truck imports and exports as well as manufacturing, pricing, profitability and volume.
- Commercial vehicle forecast impacts are, as yet, unclear, owing to questions on the tariffs’ duration and timing, but we no longer believe that a quick resolution of the trade disputes, in under two months, is likely.
Tariffs Impact on Trucking Industry: A 25% Tariff Would Potentially Affect One-Third of US Commercial Vehicle Sales
The United States on February 1 announced new 25% tariffs on imports of nearly all goods from Canada and Mexico, including cars and trucks, with implementation initially delayed to March 4. After clarification that United States-Mexico-Canada Agreement (USMCA) compliant (i.e. locally produced) vehicles would be excepted for another four weeks, the new effective date is now expected to be April 2.
Combined with the immediate retaliatory actions of Canada and Mexico, the tariffs’ impact on the trucking industry could be significant, with the potential to depress near-term truck volumes and, over time, reshape commercial vehicle manufacturing.
The tariffs are particularly sensitive for the medium- and heavy-commercial vehicle (MHCV) industry, supplying trucks and buses in gross vehicle weight (GVW) Classes 4-8, or above 14,000 pounds. Since the formation of the USMCA trade agreement and NAFTA before it, the share of commercial trucks imported from Canada and Mexico has more than doubled and now represents nearly one-third of US new-vehicle demand.
Moreover, exposure varies greatly by vehicle type and brand. Whereas more than 40% of the heavier Class 8 trucks sold in the US are imported from Canada and Mexico, only a little over a quarter of those in the lighter Class 4-7 market come from these countries. Lowest of all is the share of imported buses and motor homes, at less than 5%.
On the brand side, ties to plants in Canada and Mexico also vary widely. Extremes are represented by Ram (100% Mexico production) and by Volvo brand (0% Mexico production). Many other brands are in between, with toolsets across two or even three of the North American countries.
US New Registrations of Class 4-8 Trucks and Buses by MHCV OEM Brand (2024)
Major Supply Chain Disruptions Expected Alongside Tariffs
Commercial vehicle suppliers in the United States have little or no ability to absorb 25% cost increases imposed on goods from Canada and Mexico, and OEMs are only in a slightly better position. Moreover, some parts and systems may cross the borders multiple times during the production process.
The large displacement engines for Class 8 trucks assembled in all three countries are almost entirely produced in the United States and shipped to Canada or Mexico for vehicle installation. These engines themselves also contain parts sourced from the neighboring countries as well as other parts of the world.
Even though it is difficult to calculate cost impacts all along the supply chain, this situation makes price increases for US commercial vehicle buyers likely, should the US enact the new tariffs.
Impact of Tariffs on Commercial Truck Prices
S&P Global Mobility estimates that the net impact of tariffs on new US truck prices (MHCVs) could be around 9%, after accounting for expected depreciation of the Canadian and Mexican currencies and the relative importance of imported vehicles in the mix. This automotive industry forecast reflects how tariff policies could influence vehicle pricing dynamics.
If the tariffs were to last through year’s end, such an increase could reduce CY2025 new commercial vehicle demand in the United States by as much as 17%, at an average price elasticity of demand observed in the past. These automotive insights suggest that higher vehicle prices may dampen consumer demand.
This would negate all of the previously expected growth this year and result in a down market in CY2025 compared to CY2024, all else equal. Over the same period, MHCV production has the potential to decline relatively more sharply than demand, owing to the high number of newly built trucks in transit or in inventory.
Thanks to buoyant production levels, we estimate that the number of such vehicles currently represents around 4.5 months’ worth of demand, compared to a typical level nearer to 3.0 months.
At the brand and model level of the forecast, differential impacts are likely. Apart from variation in individual brands’ tariff exposure, we also note the potential for impacts on powertrain and propulsion choices by US truck and bus fleets.
While the largest-displacement engines are almost exclusively assembled in the United States itself, this is not the case for smaller powerplants. A significant share of gasoline engines used in medium-duty US trucks currently comes from Canada. Tariffs could have the potential to shift some of these customers to other internal combustion engine (ICE) choices, including diesel.
It may also turn out that the latest incremental tariffs on mainland China and other trading partners further increase the already-high purchase prices of zero-emission vehicles (ZEV), slowing the uptake further.
How Long Will Trucking Industry Tariffs Last?
As important as the level of the new US tariffs, arguably, will be the duration of the new rates, presently unknown. Short-lived tariffs for the trucking industry, if in place for just several weeks, may impact price and profitability.
In addition, the trucking industry might respond by re-timing vehicle and parts moves across the border, to avoid or minimize the tariff impact.
Duties lasting a little longer, say for several months or more than a year, will impact trucking industry volumes and, perhaps, result in some shifting of production to the United States from its neighbors, via increased line rates and shifts.
Finally, duties perceived to be “permanent” may re-shape the manufacturing-footprint and trade flows more fundamentally. Together with our colleagues in light vehicle industry analysis, S&P Global Mobility’s MHCV forecast team see a scenario with more or less permanently elevated tariffs among the three USMCA members as unlikely.
Rather, if the 25% tariffs enter into force as expected in April 2025, we now believe they will last for a more extended period of 16-20 weeks, or 4-5 months. This marks a departure from our previous assessment, of a limited duration. All of this takes place against the background of the upcoming re-negotiation of the USMCA trade arrangement as well as upcoming mid-term US Congressional elections, in 2026.
For the time being, amid the recent volatility surrounding enforcement, we maintain a “wait and see” posture in the commercial vehicle forecast. While we take a partial allowance in the Q1 2025 forecast for the possibility of new 25% tariffs on Canada and Mexico, the introduction of 25% import duties is not included in our base case assumptions.
Commercial Vehicle Forecast Updates
As they stand, the new registrations forecast figures for the United States published this week foresee an 11% climb in US Class 4-8 truck and bus volume in CY2025 compared to CY2024. In CY2026, we anticipate a further step up, of 8% year over year.
Meanwhile, for Canada we expect demand to slide 3% in CY2025 before recovering 12% in CY2026. And in Mexico, we anticipate a deeper drop of 26% in CY2025, after a regulation change, before a 2% rebound in CY2026.
Production in the region, and in the United States individually, rises significantly less in CY2025 in the forecast, owing to pre-existing inventory, but in 2026, it keeps pace.
Learn more about S&P Global Mobility’s commercial vehicle forecast data and download a data sample.
This article was published by S&P Global Mobility and not by S&P Global Ratings, which is a separately managed division of S&P Global.
S&P Global Mobility experts provide guidance on the ramification of new government policies, including tariffs, for the automotive industry