With a trade war potentially leading to an economic downturn, it is essential to understand how recessions impact trucking. Over the last few months, President Trump has released various tariffs on imports into the U.S. Along with importations from different countries, the tariffs are for specific imports like aluminum and steel. Trump also released a 10% universal import tax on all Countries. Countries like China are responding by releasing retaliatory levies on the U.S., causing a trade war. U.S. Economics fears this trade war could escalate further, potentially leading to a recession. While the tariffs will directly affect international shipping, they will also directly impact domestic shippers.
How Recessions Impact Trucking
Recessions can significantly affect the trucking industry due to its importance in both domestic and international shipping. Trucking is typically the first and last supply chain component for shippers moving cargo to and from other countries. This is called drayage, which transports goods short distances, like a port, to the final destination. One of the primary effects that can come from recession is reduced freight demand. Along with fewer imports into the U.S., this can mean a decline in cargo shippers moving domestically. For truckers, less volume may lead to lower shipping rates and less revenue. Smaller trucking companies operating under a thin margin could face bankruptcy.
After the coronavirus pandemic, the trucking industry felt a similar recession, and many carrier companies went bankrupt. There was an overabundance of available carriers and a decreasing cargo amount. Along with impacting trucking, the recession directly influences the supply chain that requires domestic shipping. For example, if the shipper imports internationally, a decrease in demand means less production and imports. In turn, this could mean less business for truckers and fewer goods for customers. Since a tariff hike would cause a potential recession, various parts of a supply chain could see higher prices.
How Can You Protect Your Shipment During A Recession?
Due to the disruptions that recessions can have on domestic shipping, it is increasingly crucial that you protect your shipment. It can be essential to monitor economic trends, which allows the shipper the opportunity to plan. For supply chains that require importation before moving the cargo domestically, it can be ideal to diversify their supply chain. Along with using multiple suppliers, this can mean using different conveyance methods. Importers can also import from countries other than China. It is also essential to vet your carriers for reliability and financial stability. Shippers typically use a freight broker or 3PL (Third-Party Logistics) provider to find a carrier.
While scenarios like a potential recession may seem daunting, they should not stop you from moving your goods domestically. However, you should take the appropriate steps to prevent disruptions in your supply chain. Along with the steps mentioned In the article, you can do this by speaking to a freight broker. Freight brokers are the intermediaries between the shipper and carrier who coordinate the movement of goods by truck. They do this by offering various services like finding the best rates, providing paperwork, arranging movement, etc. Brokers also educate you on the best action to protect your cargo. Reach A1 Freight Solutions at 786-375-9420 to speak to a broker and ensure the success of your shipment.