Issues, such as tariffs, English proficiency standards, and war, could result in a potential slowdown in the trucking industry. Over the last few months, demand for shipping by truck has experienced a notable decline. The previous three months saw consecutive declines in freight volumes month-over-month, with May’s volume down approximately 4% year-over-year. Orders of class eight trucks have also gone down nearly 45% year-on-year. Spot rates are notably below contract rates, showing a lack of demand. With the current trend, industry players predict that freight volumes will remain flat for the rest of the year.
Why Could There Be A Slowdown In The Trucking Industry?
Along with the current causes, many in the industry believe the slowdown began years earlier, in March 2022. During the coronavirus pandemic, there was a decline in buying goods in brick-and-mortar stores, and people started purchasing goods online. As a result, the need for trucking rose, and there was a surge in carriers entering the industry. Once COVID-19 ended and customers began returning to brick-and-mortar stores, the industry had an oversupply of trucks, prompting a recession. While the sector recovered slightly, recent matters like President Trump’s new English Language Proficiency standards (ELPs) could slow it down. An estimated 10% of all US drivers do not meet the ELP standards.
Enabling stricter ELP standards could slow the industry, potentially limiting driver availability. In turn, the reduced capacity could tighten the market and drive up rates. Higher shipping rates could increase customer prices, reduce spending, and lower freight volumes for truckers. Trump’s global reciprocal tariffs on international imports may also slow the trucking industry down. On July 9, Trump will impose duties on most countries that import freight. Importers that bring goods into the US tend to have supply chains that use multiple conveyance methods, including trucking. An example is drayage services for moving shipments to the final destination. On a large scale, higher rates could lessen the demand to ship domestically.
How May the Iran-Israel Conflict Affect the Trucking Industry?
Another recent issue that has impacted the US trucking industry is the Israel-Iran conflict. In the last few weeks, the countries have been at war, which has affected global trade. There have been recent talks that Iran may close the Strait of Hormuz due to the conflict. The waterway is significant for oil transport, with one-fifth of the world’s production passing daily. Along with international shipping, higher oil costs from the Strait’s closure may directly impact trucking. Along with the price of diesel potentially skyrocketing, rerouting to longer routes would further increase costs. To compensate, carriers may raise rates, which could decrease the volume of cargo that shippers move domestically.
Although the industry could soon experience a slowdown, it should not stop you from shipping domestically. You should, however, take the proper steps to mitigate potential disruptions to your supply chain. An ideal way to prepare is by speaking to a freight broker beforehand. Brokers are the middleman between shippers and carriers and coordinate a shipment’s movement on behalf of the shipper. They do this by connecting to a network of carriers ready to ship your cargo. Brokers also offer solutions, such as providing paperwork, finding rates, and consultation to ensure a successful shipment. Contact A1 Freight Solutions at 786-375-9420 or info@a1wwl.com for a quote for moving your cargo domestically.