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A $1.6 trillion trade system built over decades is now showing signs of strain. This new report reveals how recent tariffs disrupted supply chains, erased billions in trade, and exposed hidden weaknesses across North America’s economy. Behind the headlines are deeper risks—and bold proposals to fix them. Get exclusive access to the full analysis, data, and insights shaping the future of U.S.–Mexico trade. Subscribe for free to unlock the complete report and stay ahead of the economic shifts redefining the region.

Tariffs Shake North American Trade and Expose Fragile Supply Chains

Texas Border Business

A new report by Daniel Covarrubias, Ph.D., the Director of Texas A&M International University’s A.R. Sanchez, Jr. School of Business’ Texas Center for Economic and Enterprise Development, and Heleodoro Lozano Program Manager at the Texas Center for Border Economic and Enterprise Development at Texas A&M International University of the Texas Center at Texas A&M International University finds that three tariff actions in 2025 disrupted decades of North American economic integration, reducing trade flows and exposing structural vulnerabilities in cross-border supply chains.

According to Crossing Paths: Insights into U.S. International Trade, trilateral trade between the United States, Mexico, and Canada grew from $265 billion in 1994 to $1.6 trillion by 2024, forming what the report describes as “the backbone of automotive manufacturing, electronics assembly, energy distribution, and agricultural trade.” The authors characterize this system as “an engineered system with identifiable components, measurable outputs, and real vulnerabilities.” 

The report identifies 2025 as a turning point. It states that tariff measures introduced between January and June—including a 25 percent tariff on all products from Mexico, targeted tariffs on vehicles and parts, and a 50 percent tariff on steel and aluminum— “sent shockwaves through the integrated manufacturing networks that had taken decades to build.”  

Data presented in the report show measurable declines in trade. U.S. imports of vehicles and auto parts from Mexico fell 6.1 percent, a reduction of $4.1 billion, while imports of aluminum, iron, and steel declined 13.6 percent, or $873 million, in the first half of 2025 compared with the same period in 2024. Combined, the report estimates that “nearly $5 billion in trade value evaporated in the first half of the year.” 

Although tariff revenues reached $4.1 billion during the period, the report concludes that “trade declines exceeded revenue gains, resulting in a net loss of economic activity.”  The analysis also notes that exemptions under the United States-Mexico-Canada Agreement limited some impacts, with an estimated 35 percent of U.S. content in assembled vehicles not subject to tariffs.  

The report highlights the concentration of trade activity at key infrastructure points. Port Laredo, described as “the busiest port of entry in the United States,” processed $340 billion in trade in 2024 and serves as a central node in North American commerce.  The document notes that the port handles more than 19,000 truck crossings per day and over 23 million total crossings annually, underscoring its role in sustaining cross-border supply chains.  

Sector-level analysis shows that the automotive trade remains dominant, with $488 billion in vehicle and parts trade recorded through November 2024. Canada and Mexico accounted for 51 percent of that total, reflecting what the authors call an “integrated production network” in which components cross borders multiple times before final assembly.  

Beyond documenting impacts, the report argues that the disruptions reveal deeper institutional gaps. It states that North America lacks “mechanisms for positive industrial coordination,” resulting in “competing national subsidies without a regional strategy” and “exposed supply chain vulnerabilities.”  

To address these issues, the authors propose new governance frameworks, including a binational customs agency, a continental digital infrastructure initiative, and a North American Industrial Coordination Council. These proposals are intended to align policy, improve data sharing, and coordinate investment across strategic sectors such as semiconductors, clean energy, and advanced manufacturing.  

The report concludes that North American integration remains substantial but fragile. It states that “the data is clear. The architecture is documented. The vulnerabilities are measured,” and emphasizes that future competitiveness will depend on whether governments establish institutions capable of managing an increasingly interconnected regional economy.

“Crossing Paths 2025” refers to the 2025 edition of Crossing Paths: Insights into U.S. International Trade, a flagship research compilation produced by the Texas Center for Border Economic and Enterprise Development at Texas A&M International University.

• A comprehensive annual report compiling ten analytical editions into one publication

• Focused on U.S.–Mexico and North American trade, combining data, sector analysis, and policy evaluation
• Built around a three-part structure:
  1. The architecture of trade integration
  2. The disruption caused by the 2025 tariffs
  3. Institutional solutions for the future  

See and download the Crossing Paths report below: