Cross-border freight tightens amid cost and compliance pressure

U.S.-Mexico

Mexico freight market pressures emerge

The defining challenge for shippers in Q2 is not demand but securing reliable capacity in a market where carrier economics are under pressure from multiple directions, with early signs of tightening emerging on select export and crossdocking lanes.

Entering Q2, the freight market reflects strong northbound trade volumes alongside mounting pressure on carrier cost structures driven by higher diesel prices, rising labour and insurance costs, tightening driver availability and evolving compliance requirements. These pressures are converging within a carrier base that entered 2026 having already absorbed significant cost increases during 2025.

• Diesel prices in Mexico rose significantly in March, with some regions reaching or exceeding 30 pesos per litre. While the government activated the Impuesto Especial sobre Producción y Servicios (IEPS) subsidy mechanism to limit passthrough to end consumers, pressure at distribution terminals is already flowing into carrier operating costs.
• Labour now accounts for nearly half of logistics expenses in Mexico, with minimum wage increases and regulatory changes compressing margins.
• Vehicle and cargo insurance premiums increased 10% to 20% in Q1 2026 following value-added tax (VAT) credit changes that shifted costs directly to insurees.
• Toll rates on key corridors have risen 3.5% to 4% since early 2026.

If global oil prices remain elevated, carrier cost structures are likely to deteriorate further without corresponding rate adjustments. Shippers should anticipate rate increase requests and validate that any adjustments are supported by documented fuel and operating cost changes.

The surge in intermediate goods imports remains the most constructive forward indicator; if it reflects sustained manufacturing expansion, northbound freight volumes through Q2 will retain a durable demand foundation. Incoming import data over the next two months will be critical in clarifying how these dynamics evolve.

Strict U.S. English language requirements for commercial driver visa holders are sidelining Mexican drivers, particularly in Tijuana, while U.S. restrictions on commercial licences for migrant drivers are compounding the impact. Together, these policy changes are reducing the qualified driver pool for cross-border moves, increasing border friction and elevating operational risk on affected lanes.

The government’s 6-billion-peso fleet renewal programme, combining tax deductions for new vehicle purchases with 250 million pesos in development bank guarantees for small operators, directly targets a national fleet with an average age of 19 years. The initiative focuses on the owner-operator segment, which represents the majority of Mexico’s transport providers.

Mexico trade developments

February closed with Mexican exports up 15.8% year over year (y/y), marking the second highest growth rate in 37 months. Despite these headline figures, the broader Mexican economy is showing signs of losing momentum as export growth peaks.

USMCA renegotiation talks have formally opened, introducing additional uncertainty even as Mexico enters discussions from a position of trade strength.

Twenty industrial parks tied to the Plan México programme are now operational across 10 states, including Nuevo León, Baja California, Chihuahua and Jalisco. These facilities support automotive, aerospace, electronics, medical device and logistics activity and are positioned to absorb future nearshoring demand.

Nonautomotive manufacturing continues to anchor export growth, while the automotive sector recorded its tenth consecutive monthly decline in exports.

• Exports of nonautomotive manufactured goods, including computers, electronics, machinery and industrial equipment, grew 26.7% in February, extending a nine-month growth streak.
• On a cumulative basis, Mexico’s exports through January and February are up 12.2% compared with the same period in 2025, reinforcing the country’s position as the leading supplier of goods to the United States, accounting for 16.3% of total U.S. imports.
• Intermediate goods imports rose 29.5% in February, the strongest rate since August 2021 and the tenth consecutive month of growth. This pace of input inflows provides near-term support for northbound freight volumes.
• In contrast, capital goods imports declined 4.4% in January, signalling a continued “wait and see” investment posture that has yet to recover. Spot rates have remained broadly stable entering Q2, though that stability is increasingly misaligned with the cost environment carriers are absorbing.

Tariff impacts on Mexico’s automotive sector continue to deepen.

• Light vehicle exports declined 4.4% in February, while U.S.-bound automotive deliveries fell 16.7% y/y in January.
• Exports to non-U.S. markets increased 40.2%, reflecting deliberate original equipment manufacturer (OEM) diversification away from U.S. destinations rather than a broader demand slowdown.
• The auto parts sector maintained its structural position in 2025, reaching a record 43.74% share of U.S. auto parts imports, though full year production declined 2.2%.
• The national industry association projects a 9% increase in automotive sector foreign direct investment in 2026, indicating sustained strategic confidence in the corridor despite near term volume constraints.

Mexico has invested 27.6 billion pesos in customs modernisation across 14 projects, including a new 29-hectare national customs authority facility in Nuevo Laredo equipped with advanced inspection technology. Carta Porte compliance enforcement is accelerating, with inspections expected to cover approximately 30% of trucking operations.

The tax authority’s first modification to the 2026 General Foreign Trade Rules extends the Manifestación de Valour electronic value declaration grace period through 31 May 2026, providing importers a critical window to align documentation ahead of full enforcement.

U.S.-Canada

Market impacts due to government enforcement of driver rules and regulations is not unique to the United States, as Canada’s transportation market is also seeing pressure.

In February 2026, Canadian governments aligned on a co-ordinated crackdown on the Driver Inc. model, formally targeting long‑standing labour, tax and safety non‑compliance that had allowed some carriers to operate with artificially low-cost structures.

As enforcement accelerates, carriers are being required to legitimise employment models, driving higher operating costs and prompting exits from drivers unwilling or unable to transition. Others are adjusting pricing to more accurately reflect the true cost of service, reshaping competitive dynamics across affected lanes.

These pressures are being amplified by the March 2026 work‑permit expiration wave, with tighter Immigration, Refugees and Citizenship Canada (IRCC) oversight further constraining available driver supply. Together, compliance enforcement and permitting changes are reducing effective capacity at a time when networks would typically be stabilising, increasing the importance of carrier selection and capacity visibility for shippers.

Under normal conditions, April often brings seasonal rate relief as winter capacity constraints ease. This year, however, fleet downsising tied to permit expirations and compliance requirements is limiting that relief. Elevated fuel prices and higher fixed operating costs are compounding the impact, shifting the rate environment structurally higher. As a result, any rate softening in Q2 is expected to be muted and uneven relative to historical seasonal patterns, particularly in regions or segments most exposed to labour and compliance changes.

Shippers may benefit from proactive engagement with core carriers, flexible routeing strategies and realistic budgeting assumptions as the market works through these structural adjustments.

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