Report of 15 Percent Reduction in Traffic at Texas crossing where most US/Mexico Trade Transport Takes Place

With Mexico shutdown, what can US and Mexican manufacturers, transporters and buyers should expect?

On Mar 20, President Trump announced that the US would halt most traffic between theUS and Mexico. The order was directed at nonessential consumer traffic and did not affect trade. And then last week, the Mexican government announced a countrywide shutdown of all nonessential businesses.

What can Mexican manufacturers and their US customers expect?

Deepak Chhugani, founder and CEO of Nuvocargo, a digital freight forwarder and customs broker for U.S./Mexico trade says that so far, transportation companies aren’t yet seeing any big changes at the border. “After March 20, we saw an immediate 15 percent reduction in traffic at the Laredo, Texas crossing where most US/Mexico trade transport takes place,” says Chhugani. “There was a bigger reduction in traffic at the Tijuana crossing, which typically had a larger proportion of consumer travel. Truck drivers tell us there are no new procedures they are being asked to follow at crossings.”

With the Mexico shutdown here, however, Chhugani anticipates big changes. “Already we are seeing Mexican carriers with extra capacity who are lowering prices to get their trucks moving,” he says. “We expect that will become much more common. We are also seeing slowdowns in production capacity, even at essential businesses, due to social distancing mandates and businesses striving to keep their workers safe.”

Some other observations from Chhugani:

• Very uncertain demand. Right now, consumers are panic buying. This could lead to huge decreases in demand in the coming weeks – many households won’t need toilet paper, for instance, for weeks or even months, because they have stockpiled in their homes.
• Manufacturers and buyers are more carefully vetting transportation partners to make sure they are financially stable, so their freight doesn’t get stranded on the road and become collateral in a bankruptcy proceeding.
• Similarly, manufacturers and customers are looking for more transparency during transport – so they keep better track of where their freight is and when it will arrive.
• Shippers are also being extra careful with what 3PL’s and freight brokers they work with to make sure they have the financial stability to keep providing them credit during this period where most small & mid market companies are struggling with liquidity.
• Shipping costs are continuing to fall since there is more shipping capacity than usual (this will be amplified if, as expected, the Mexican government orders a shutdown of non-essential businesses this week).
• Manufacturers are increasingly offering buyers favorable terms for early payment.

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