Tariffs and trade wars add risks to trucking outlook
The trade wars began on Tuesday when President Donald Trump hit imports from Canada and Mexico with 25% tariffs. By Wednesday, the Trump administration had carved out a 30-day exemption for tariffs on automakers to give them time to shift their supply chains to the U.S. On Thursday, Trump moderated the impact again, with Reuters reporting Mexico won't be required to pay tariffs on any goods that fall under the United States-Mexico-Canada Agreement on trade until April 2. Various trucking groups have weighed in with statements highlighted below.
In a statement released Tuesday, American Trucking Associations President and CEO Chris Spear warned that the tariffs will impact over 100,000 truckers, 'hauling 85% of the surface trade in goods with Mexico and 67% of the goods traded with Canada.' In addition to cross-border impacts, operational costs are expected to increase. The ATA estimates the price of a new truck could increase by up to $35,000.
The ripple effects are expected to extend downstream of trucking. In an email to FreightWaves, Dean Kaplan, president of the Kaplan Group, said, 'We're likely to see a cascade of impacts, from potential decreases in freight volumes as trade potentially contracts, to increased operational costs for carriers themselves.'
The Owner-Operator Independent Drivers Association weighed in but added it's too early to predict specific downstream economic impacts. OOIDA said the tariffs 'have the potential to inhibit the recovery from a freight recession that has been acutely felt by America's small-business truckers.'Trucking companies in Canada also reacted to the news. The Canadian Trucking Alliance urged the Canadian government to implement relief packages for that country's trucking industry. In a release, the CTA noted, 'Carriers have already begun laying off employees. As many as one in three fleets surveyed in Ontario, for example, indicated layoffs – a number which is expected to grow in the aftermath of the tariffs.'
Travel along the North Carolina-Tennessee border resumed last weekend, the first time since October when Hurricane Helene hit the region, causing widespread damage to homes and infrastructure. Eastbound and westbound parts of I-40 are now open between Exit 7 in North Carolina through Exit 447 in Tennessee, with only one lane of travel open in each direction between Exits 15 and 20.
Both states originally planned limited service in January but faced delays due to further deterioration. While this is a positive sign for truckload carriers moving along the route, there are several restrictions in place.
FreightWaves' John Kingston writes, 'Lanes will be narrower than usual, and there will be shoulders that are reduced in size; the speed limit will be 35 mph; there will be a 9-by-9-inch concrete curb separating the two lanes; the eastbound road, which continues to undergo repairs, will have an emergency-only lane; and while a full tractor trailer is able to drive on the highway, no wide loads will be permitted.'Kingston notes the timeline for full restoration is being talked about in terms of years: 'North Carolina's statement touted that the state has entered into a Construction Manager/General Contractor contract for the permanent reconstruction of the highway. Ames Construction was identified as the contractor, RK&K is the designer and HNTB is the project manager.'
The February Logistics Managers' Index reported significant inventory changes largely driven by concerns over potential tariffs. The overall LMI increased to 62.8, up 0.8 points from January, marking the highest growth rate since June 2022. The LMI is a diffusion index, with a reading above 50 showing expansion and below 50 contraction.
'The positive movement in the overall index was driven by the continuing expansion of Inventory Levels, which were up (+6.3) to 64.8 in February, which is the fastest rate of expansion for this metric since June of 2022,' the report states. This surge in inventories contrasts sharply with 2024's lean just-in-time practices when the average Inventory Level growth was only 52.7. The report adds that the inventory surge may be part of a larger shift away from just-in-time practices, a popular strategy when transportation costs and capacity were more favorable to shippers.
The inventory buildup has led to increased costs, with Inventory Costs rising 7.1 points, to 77.3, and Warehousing Prices up 4 points, to 77. Both metrics saw their fastest rate of expansion in several years as firms increased the volume and velocity of inventory to avoid tariff-associated costs.
Transportation metrics saw capacity increase but prices cool. The Transportation Capacity Index increased 2.5 points, to 55.1, a six-month high. The Transportation Prices Index decreased 4.9 points, to 65.5, retreating from recent highs.
Despite these changes, the report concludes that 'inflationary pressures on Transportation Prices are still present across the supply chain.' Looking ahead, the future index for transportation prices fell slightly to 76.8. The reading still indicates strong expectations among respondents of higher Transportation Prices in the next 12 months.
Summary: A rapid cooling in reefer outbound tender rejection and spot market rates continues, but they are still outperforming the past two years. The past week saw reefer outbound tender rejection rates fall 58 basis points w/w from 10.36% on Feb. 24 to 9.78%. Compared to the past two years, ROTRI is 428 bps higher than 5.5% in 2024 and 611 bps higher than 2023's 3.67%.
ROTRI continues to follow seasonal expectations, buoyed by a monthslong decline in reefer outbound tender volumes. Lower volumes beget lower rejection rates: ROTVI is down 114.65 points or 8.31% m/m from 1,379.72 points on Feb. 4 to 1,265.07 points. A small rally in reefer tender volumes observed during the third week of February fizzled, with the past week seeing ROTVI down 8.4 points w/w from 1,273.47 points on Feb. 24 to 1,265.07 points.Falling tender volumes and rejection rates dragged down reefer spot market rates, which fell 12 cents per mile all in w/w from $2.60 on Feb. 24 to $2.48. Reefer spot rates are now 6 cents per mile lower compared to 2024, when RTI was at $2.54 per mile. Another factor for reefer rate declines comes from excess reefer capacity. A recent U.S. Department of Agriculture fruit and vegetable truck rate report showed adequate truck availability for most of the districts/regions in the U.S., with Mexico crossing through South Texas and Yakima Valley and Wenatchee District in Washington state reporting a surplus of reefer capacity.
Trucking lobby warns against Trump's tariffs on Mexico and Canada (FreightWaves)
Bison adds barcode tech to give real-time freight updates (Trucking Dive)
Preliminary Class 8 Net Orders Stepped Back Further in February (ACT Research)
Manufacturing is on the rebound, but tariffs threaten growth: PMI (Trucking Dive)
OOIDA asks Congress to restore per diem tax deduction for employee truckers (Land Line)How Sean Duffy's DOT is already reshaping trucking (Fleet Owner)
The post Tariffs and trade wars add risks to trucking outlook appeared first on FreightWaves.
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