S&P Global Mobility notes that more than 40% of the heavier Class 8 trucks sold in the U.S. are imported from Canada and Mexico.
The Trump administration's proposed 25% tariffs on imports from its trading partners Mexico and Canada would affect one-third of commercial vehicle sales in the US, according to a study published by S&P Global Mobility.
On February 1, the United States announced new 25% tariffs on imports of almost all goods from Canada and Mexico, including cars and trucks. The date of entry into force of the new tariffs, which was initially scheduled for February 4, was postponed by President Trump after speaking with his Mexican and Canadian counterparts, and has been postponed to March 4.
Combined with immediate retaliatory measures from Canada and Mexico, the impact of tariffs on the trucking industry could be significant, with the potential to depress truck volumes in the short term and, over time, reshape commercial vehicle manufacturing, the study notes.
S&P Global Mobility notes that the tariffs are particularly sensitive for the medium and heavy commercial vehicle (MHCV) industry, which supplies trucks and buses in gross vehicle weight (GVW) classes 4 through 8, or more than 14,000 pounds.
Since the formation of the United States-Mexico-Canada trade agreement (USMCA) and the previous North American Free Trade Agreement (NAFTA), the share of commercial trucks imported from Canada and Mexico into the U.S. has more than doubled and now accounts for nearly one-third of U.S. new vehicle demand.
Moreover, exposure varies widely by vehicle type and brand. While more than 40 percent of the heavier Class 8 trucks sold in the United States are imported from Canada and Mexico, only a little more than a quarter of the lighter Class 4 through 7 trucks on the market come from those countries.
The lowest proportion of all is for imported buses and motorhomes, at less than 5%. As for brands, links to plants in Canada and Mexico also vary widely.
The extremes are represented by Ram (100% production in Mexico) and the Volvo brand (0% production in Mexico). Many other brands are somewhere in between, with tool sets in two or even three of the North American countries.
SUPPLY CHAIN DISRUPTIONS WITH TARIFFS
The report also says that U.S. commercial vehicle suppliers have little or no capacity to absorb the 25% cost increases imposed on goods from Canada and Mexico, with original equipment manufacturers in a little better position. In addition, some parts and systems may cross borders multiple times during the production process.
Large-displacement Class 8 truck engines assembled in all three countries are almost entirely produced in the United States and shipped to Canada or Mexico for installation in vehicles. These engines also contain parts from neighboring countries.
While S&P Global Mobility says it's difficult to estimate cost impacts across the supply chain, this makes price increases likely for U.S. commercial vehicle buyers if the country enacts new tariffs.
IMPACT OF TARIFFS ON COMMERCIAL TRUCK PRICES
S&P Global Mobility also estimates that the net impact of tariffs on new truck prices in the United States (MHCV) could be around 9%, after taking into account the expected depreciation of the Canadian and Mexican currencies and the relative importance of imported vehicles in the mix.
If these tariffs were to remain in place through the end of the year, such an increase could reduce demand for new commercial vehicles in the United States in calendar year 2025 by as much as 17%, using the average price elasticity of demand observed in the past.
This would negate all previously expected growth for this year and result in a bear market in calendar year 2025 compared to calendar year 2024, all else being equal.
THE DURATION OF THE IMPOSITION OF TARIFFS AFFECTS DIFFERENTLY
Finally, the study points out that in addition to the level, the duration of the tariffs is also important, which is still unknown.
Short-term tariffs for the road transport sector, if applied for only a few weeks, can affect prices and profitability.
In addition, the trucking industry could respond by rescheduling vehicle and parts movements across the border to avoid or minimize tariff impact.
Taxes lasting several months or more than a year will impact trucking industry volumes and perhaps result in some shifting of production from neighbors to the United States through higher line rates and shifts.
Moreover, tariffs perceived as “permanent” may reconfigure the manufacturing footprint and trade flows in more fundamental ways.
S&P Global Mobility's MHCV forecasting team considers a scenario with more or less permanent high tariffs among the three USMCA members to be unlikely.
On the contrary, if the 25% tariffs go into effect as announced in March, the firm believes that their duration will be shorter, in the context of the upcoming renegotiation of the USMCA trade agreement, as well as the upcoming midterm congressional elections in the United States in 2026.
"For the time being, amid recent volatility around enforcement, we maintain a 'wait and see' stance on the commercial vehicle outlook. While we partially account for the possibility of further 25% tariffs in Canada and Mexico in the first quarter 2025 forecast, the introduction of 25% import duties is not included in our base case assumptions," the study concludes.
