“I really thought we were coming out [of the freight recession] as an industry,” Costello said. “The economy as a whole was slowing down before the tariffs, but the things that drive truck freight were moving in the opposite direction. I thought things were going to get better.”

That brief optimism has since been shaken. A fresh round of tariffs from the Trump administration has thrown new pressure onto the freight economy, threatening to disrupt the fragile recovery that had only just begun. While the administration’s approach may be aimed at strengthening American manufacturing long term, Costello said the near-term consequences will be higher prices and tighter supply chains.

He noted that more than 70 countries have shown interest in negotiating trade agreements in response to last week’s tariffs, and there’s still a chance that some of the measures could be reversed or restructured. For Costello, that would be the best-case scenario. The markets briefly reflected that hope, bouncing slightly on Tuesday. He believes a targeted tariff strategy would be far more effective than broad, sweeping actions and could help ease the uncertainty that’s been creeping into economic forecasts.

“If the administration backed off quickly and said they got what they wanted, it would help us get back on track to where we were hoping to be,” he said.

Costello said he spent last Friday revising most of the key economic indicators impacting truck freight, adjusting expectations for 2025 from modest growth to stagnation or outright contraction. What had been a cautiously optimistic outlook for the year now points to flat or even declining performance across multiple fronts. Before the tariffs were announced, ATA had forecast U.S. GDP to grow by 1.4% in 2025, with quarterly growth at 1.2%, 1.6%, and 2.1%. As of Friday, those numbers have dropped to 0.3% for the year, and 0.5%, 0.3%, and 0% for the final three quarters.

The outlook for freight-related sectors isn’t faring any better. Factory output, originally expected to rise by 1.3% this year and 2.5% in 2026, is now forecast to decline by 1.0% and 0.8%. Previously projected to grow by over 2.0%, consumer spending on goods has been slashed to just 0.5% in 2025 and 0.6%. Even housing starts have taken a hit. Still, Costello urged the TRALA audience not to treat the latest numbers as set in stone. With tariff decisions evolving so quickly, the ATA has started time-stamping all of its forecasts. Any shift in trade policy—positive or negative—could immediately make the current data irrelevant.

Despite the volatility, Costello hasn’t ruled out a rebound. He emphasized that conditions were genuinely improving before the latest policy shifts. “Excluding the tariffs for a moment, things were starting to move in the right direction. It was going to get a little bit better and fleets were going to feel a little bit better,” he said.

Costello also flagged another possible future disruption—one tied to an ongoing investigation into Chinese shipbuilding and maritime practices. Earlier this year, the Trump administration released recommendations from the Biden-era U.S. Trade Representative that call for steep port call fees, ranging from $1 million to $3 million per entry, for Chinese-linked ships. These proposed penalties, aimed at curbing what the USTR labeled unfair trade practices, could severely impact the flow of imports into U.S. ports if enacted. However, Costello noted that the administration may reconsider the timing and scale of those fees amid industry pushback.

While the trucking industry just endured one of its longest freight recessions on record—27 months of sluggish conditions—Costello fears another downturn could be far more damaging. Many carriers were only just starting to regain their footing. “If another recession hits right now, it could be devastating for carriers who were finally starting to swim again after years of treading water,” he said.

For now, trucking’s path forward remains deeply tied to Washington’s decisions. Costello’s message was clear: the ingredients for recovery are still there, but so is the risk of letting it all unravel.

Source: Commercial Carrier Journal

The post Tariffs Disrupt Trucking’s Fragile Recovery Says ATA Economist Bob Costello appeared first on Truck Drivers USA.

Bob Costello, Chief Economist and Senior VP of International Trade and Security Policy at the American Trucking Associations (ATA), delivered his 2025 Economic Industry Review. He outlined how these proposed tariffs would affect the trucking sector, from increased equipment costs to significant changes in freight patterns.

Tariffs and Their Ripple Effect

One of the proposed tariffs’ most surprising impacts is how they may alter freight patterns. Costello touched on the potential fees suggested by the U.S. Trade Representative’s office, which include up to $1 million per port call for Chinese vessel operators and $1.5 million for shipping companies using Chinese-built vessels.

Costello explained, “It absolutely could change freight patterns. I think it’s a really big deal.” Such high charges could discourage shipping lines from making multiple port calls, potentially consolidating their stops. “What they’re probably going to do is dump all of the cargo in one port and move on,” Costello noted.

This shift impacts not only imports but also export activities along the East Coast. Smaller ports that play a vital role in local industries may suffer. For instance, factories in Alabama rely on the Port of Mobile for exports. “There’s a good chance a lot of these ocean carriers are not even going to make that call and not go to Mobile anymore,” he added.

Consumer Behavior Drives Freight Patterns

Costello predicted a gradual return to standard freight patterns in 2025, following consumer-driven spending habits that delayed economic recovery. He warned, however, that implementing additional tariffs could trigger another economic downturn.

The proposed tariffs include an additional 10% on goods from China, 25% on steel and aluminum, and 25% on Canadian and Mexican imports. The latter is particularly concerning for the trucking sector as it directly affects the costs of tractors and trailers.

“If it in fact goes through … for any substantial amount of time, I think that brings in a real risk of macro recession, no doubt about it,” Costello stated. He emphasized that tariffs function as taxes, and price increases on goods will ultimately lead to consumers purchasing fewer items, dragging down freight volumes.

This follows the trend during the pandemic-fueled freight recession, where spending on goods skyrocketed due to limited entertainment and travel options. “We all remember; it was not fun. So, what did people start doing during that period? They just started buying stuff,” Costello recalled. Terms like “revenge travel” became popular as consumers shifted their focus from goods to experiences, attending concerts, or taking multiple vacations.

Now, with consumer spending normalizing and the economy showing signs of stabilization, the trucking industry faces an adjustment period.

Market Stabilization and Economic Outlook

Despite some turbulence, positive trends are on the horizon for the freight sector. Costello projects a 3.3% increase in goods spending and a 2.2% rise in spending on experiences this year. Notably, inflation for goods is currently lower than for services, encouraging higher spending on physical products.

Additionally, factory output, which declined by 0.4% in 2023 and 2024, is expected to rebound with a growth of 1.3% in 2025 and 2.5% in 2026. Although some subsectors may see slower recovery, overall manufacturing activity is anticipated to drive freight demand upwards.

The housing market also shows promise. Costello forecasted consistent growth in existing home sales, prompting an uptick in expenditures for home improvements. Meanwhile, new housing starts, estimated at one million, are likely to generate substantial freight opportunities.

“It wasn’t like the boom of the pandemic, but it’s certainly much better, and I think that is absolutely going to help,” Costello concluded.

Source: Commercial Carrier Journal

Image Source: Angel Coker Jones

The post The Unpredictability of the 2025 Freight Economy appeared first on Truck Drivers USA.