Trump's tariffs could kick off the next leg of the yearslong US freight recession
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- Tariffs are expected to keep the US's long-running freight recession alive.
- Trucking rates have been depressed since the pandemic.
- One truckmaker expects the trucking market to shrink 10% by year-end.
There's more rough road ahead for US trucking.
Though the American freight sector has already endured a multi-year downturn, Donald Trump's sweeping tariffs could make matters worse.
"Tariffs have become the topic du jour in boardrooms and beyond, and combining those policy changes with a cloudy macroeconomic picture is a recipe for the uncertainty and caution that characterize current market sentiment," Andy Dyer, CEO of AFS Logistics, said in a quarterly report.
Rapid shifts in trade policy are an obstacle for those betting on an end to the so-called "freight recession," a slowdown in US trucking that began during the COVID era.
With consumption booming during the pandemic years, trucking capacity exploded. This was to be short-lived, however. High interest rates and a spending pullback slashed freight demand, leading to sector-wide bankruptcies and price wars.
According to AFS, the consequences continue to this day, with the truckload rate per mile index projected to hover near bottom lows for nine consecutive quarters. While the index picked up unexpectedly in the first quarter, this is likely a tariff side-effect, as customers increased shipments to boost inventory ahead of any trade conflict.
Now, tariff fears are shaping future outlooks for the industry.
The truckmaking firm Traton recently warned about a shrinking market in a Monday call with investors cited by Reuters. Concern about a global recession is causing US truckers to defer orders, the company said, which could lead to a 10% industry contraction by the end of this year.
The fears aren't unfounded. Economists have grown nervous about a consumer pullback amid rising macro uncertainty, as tariff policy ignites fears of revived inflation. Chances of a US recession have climbed steadily last week, especially after President Donald Trump's latest volley of tariffs.
Traton signaled that this could weigh on margins meaningfully in the first quarter. The freight recession has weighed on shares of US freight carriers. Consider JB Hunt, an industry bellwether, which is down 22.95% so far this year.
In March, Bank of America lowered its earnings outlook for parcel sector heavyweights UPS and FedEx due to tariffs and a tough stretch of bad weather in the first quarter.