ACT Research says U.S. tariffs and the resulting trade war will prolong the for-hire freight recession.
“As Q2 begins, retail sales are still brisk as consumers snap up pre-tariff prices, but freight demand fundamentals face major self-inflicted tariff headwinds. The pre-tariff inventory stocking period will soon reverse, and consumption will fall as prices rise,” says Tim Denoyer, vice president and senior analyst. “We expect a few more months of brisk demand for pre-tariff goods, followed by a tariff adjustment period with lower goods demand. Freight is very much in the crosshairs of the trade war.”
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ACT analysts expect higher cost equipment as a result of tariffs to tighten capacity and, eventually, end the freight recession. But in the meantime, 20-25% of U.S. surface freight is involved in international trade, and analysts expect an initial jolt.
“The trucking industry also faces considerable supply shocks related to new U.S. government policy,” Denoyer says. “Both equipment and labor supply are affected, and this is likely to press truckload rates up after tariffs take their toll.”
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On the bright side, FTR reported Monday its Trucking Conditions Index rose in February to a reading of -0.21, up from a -2.56 in January. Improved volume and utilization and smaller increases in fuel costs mostly offset weaker freight rates to produce near-neutral market conditions for carriers in February.
But longer term, the outlook is notably weaker than it was previously, the company adds.
“With global tariffs and a full-fledged trade war against China, we have reduced our economic and freight forecasts due to expectations of higher inflation and interest rates and a weaker labor market coupled with a payback from elevated imports in the first quarter to avoid tariffs. With this change, we expect that near-term truck freight market conditions will be more challenging for carriers, postponing a sustained recovery until early next year,” says Avery Vise, FTR’s vice president of trucking.
