As President Donald Trump readies the next phase of the U.S. trade war, with tariffs on Mexico and Canada set for next Tuesday, additional tariffs on China, and EU tariffs coming as well, U.S. freight railroads are bracing for an impact that hits at the heart of a vast traffic network connecting world economies.
In 2024, U.S. railroads handled an estimated $203.1 billion in cross-border trade with Canada and Mexico, according to a new report from the Association of American Railroads.
The split between the nations is close to even, according to Bureau of Transportation Statistics data: $104.8 billion in U.S.-Canada trade (66% imports, 34% exports) and $98.3 billion in U.S.-Mexico trade (65% exports, 35% imports).
The rail trade group warned that its investment in transportation infrastructure requires a growing economy.
“When the economy is doing well, we do well and we’re all about making investments to compel economic growth,” said Ian Jefferies, CEO of AAR. “Trade is a key part of that, whether it’s exports going out to our North American partners or imports coming in from our ports.”
In 2023, U.S. rail transportation generated $233.4 billion in total economic output with more than $50 billion in direct value-added to GDP, according to the AAR. (2024 data on GDP impact will not be available until Q4 of this year.)
The sector supported 749,400 jobs in 2023, generating $66.1 billion in household income.
The five states that have the highest freight rail employment are Texas, Illinois, Nebraska, California, and Georgia. Texas tops the employment list given the state handles nearly 90% of U.S.-Mexico cross-border trains at its four crossings.
The AAR invested roughly $26.8 billion back into its network last year, “and that’s almost entirely private capital going back into our infrastructure to facilitate international movements,” Jefferies said.
Projects include CPKC‘s Laredo Bridge and the Ottensmeyer International Railway Bridge,Berkshire Hathaway‘s BNSF railroad Barstow International Gateway, and the Union Pacific, CN and Grupo Mexico Transportes intermodal service Falcon Premium, operating between Canada, the U.S. and Mexico,
Infrastructure projects have generated thousands of jobs and billions in investment, according to the AAR. Union Pacific is also investing in new intermodal ramps in Phoenix, Kansas City and Salt Lake City. In Maryland, CSX and public partners are reconstructing the Howard Street Tunnel to accommodate double-stack traffic to move containers out of the Port of Baltimore faster and off the road.
“You’re seeing investments and service products being brought online to match what is an international market to make sure that America maintains its global competitiveness and that our economy is poised to grow, to push goods both directions,” Jefferies said.
Based on trade data, the U.S.-Canada rail corridor is a major conduit for automotive components, petroleum products, forest products, and chemicals, reflecting the deep industrial integration between the two economies. Trade at the U.S. and Mexico border, according to the AAR report, includes significant volumes of automotive products, agricultural goods, and industrial materials.
The cross-border trade is moved along 23 U.S.-Canada rail crossings and seven U.S.-Mexico crossings. Each location, Jefferies says, provides an economic injection into the local economies.
“Industrial development is a key economic driver,” Jefferies said.
Norfolk Southern alone in 2024 saw $4.3 billion in industrial development investments on its network of 149 projects.
The largest share of trade, up to 70%, moved by freight rail involves non-North American countries. The range of commodities and freight is vast. The chemicals (17% imported and exported) include ethanol, plastics, and industrial chemicals essential for global manufacturing. Nearly 40% of U.S. grain exports move by rail to U.S. ports or land borders. Also moved by rail, metals including iron ore and scrap metal as well as minerals (15%).
Serving the Canada-U.S. border, Illinois is home to the single busiest rail hub in the world in Chicago: Six Class I railroads, 40 short-line railroads, and an extensive network of intermodal terminals and classification yards that move both national and international commerce. In 2023, rail activity in Illinois contributed $4.7 billion in household income and supported 38,600 additional jobs across various industries.
On the West Coast, California links the U.S. to the global markets via its West Coast ports. Close to 7,000 freight rail employees work in the state, assisting in the movement of intermodal containers, consumer goods, food products, and chemicals.
“We’re all aware of the supply chain challenges the global supply chain felt back a few years back,” Jefferies said. “We’re seeing volumes on that same level, but maintaining a very high level of service. I think railroads have shown a willingness and an ability to meet immediate demand, but are also setting our customers and businesses up for success in the future by making the investments now to support that expected increased demand in the future.”