- Logistics companies have heavily invested in US-Mexico infrastructure, betting on continued cross-border trade despite potential tariffs on Mexican goods.
- The rise of nearshoring has prompted large investments in warehousing, trucking, and rail, aimed at facilitating trade between Mexico, the US, and Canada.
- Logistics companies remain confident in the long-term value of their investments, with many emphasizing factors beyond trade policy driving growth.
To say that logistics operators have made significant investments in infrastructure along the US-Mexico border would be an understatement. For years, they’ve been anticipating a boost in cross-border trade driven by nearshoring trends.
However, as US President-elect Donald Trump’s potential tariff threats loom, these companies are bracing for possible trade disruptions, as reported by WSJ.
The Rise of Nearshoring
The past few years have seen a surge in logistics investments in warehouses, trucking terminals, and rail yards across the US-Mexico border.
Firms like C.H. Robinson, Kuehne + Nagel, and Prologis (PLD) have expanded operations in anticipation of more manufacturing activity in Mexico, a trend driven largely by companies moving production closer to the US, called nearshoring.
“This isn’t just about tariffs,” said Joachim Goller, Senior VP of North America Road Logistics at Kuehne + Nagel.
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In 2023, a landmark $31B merger between Canadian Pacific and Kansas City Southern created a new transnational freight railroad connecting Mexico, the US, and Canada.
Meanwhile, companies like Schneider and XPO Logistics (XPO) have expanded their trucking services, while Ryder (R) and Prologis have committed to investing more in warehousing on both sides of the border.
Threat of Trade Tariffs
President-elect Trump has already threatened a 25% tariff on imports from Mexico and Canada if the countries don’t take stronger action on issues like drug trafficking and immigration.
However, logistics operators have largely brushed off the risk, with many noting that tariffs are not a new issue, and they don’t foresee any tariffs really derailing the long-term growth of cross-border trade.
Mark Rourke, Schneider’s CEO, is confident that his company’s efforts to expand freight services across North America will bear fruit “regardless of what happens with tariffs.”
The Bigger Picture
In response to the growing demand for cross-border trade, the Mexican government has committed $2.7B to expand the Port of Manzanillo, aiming to double its capacity by 2030.
These investments reveal that Mexico’s government is also betting on continued cross-border trade with the US, despite the uncertain political climate.
Jason Miller, a logistics expert at Michigan State University, also pointed out that while tariffs might make other regions more appealing for manufacturing, the advantages of labor costs and proximity to the US will keep Mexico an attractive destination for production.
Looking Ahead
With trade volume between the U.S. and Mexico rising to $475B in 2023, logistics companies are doubling down on their cross-border infrastructure.
Although the tariff landscape may change, they’re betting that the broader forces of nearshoring, cross-border trade agreements, and improved infrastructure will continue to outweigh the risks.
