The Trucking Industry Can’t Cut Its Way to Prosperity in 2026

It’s shaping up to be another tough year in 2026 for US freight.

With a big hand from a Department of Transportation crackdown on foreign drivers, the trucking industry is finally getting a handle on the overcapacity that has plagued the industry since the end of the pandemic and has kept freight rates low. But constraining supply alone won’t reverse the industry’s fortunes.

The demand side of the equation still looks anemic for 2026 after the goods economy was thrown into a cycle of uncertainty and weakness because of President Donald Trump’s aggressive tariff strategy. This uncertainty for manufacturers and retailers still lingers.

Manufacturing, the largest driver of freight demand, has mostly been in contraction mode since late 2022, according to the Institute of Supply Management’s monthly survey. Manufacturing boomed during Covid-19 lockdowns when people burned through stimulus money to buy goods. That reversed when consumers ventured outside their homes and switched to spending on services and entertainment.

Heading into 2025, many had predicted manufacturing demand would return to normal, but that was before Trump unleashed tariffs on almost every nation in the world including close trading partners Canada and Mexico. The pull-forward of freight to avoid the tariffs was followed by an import lull that wreaked havoc on normal shipping patterns and left many manufacturers scrambling. About half of what the US imports are parts that manufacturers depend on, said Bob Costello, chief economist for the American Trucking Associations.

The Trump administration would be wise to provide US manufacturers with some certainty around tariffs and trade to have any chance of reviving the economy and convincing voters that the country is on the correct path, but that’s unlikely to happen. The tariffs are still fluctuating as the Supreme Court deliberates them, as deals get finalized and as the president uses them to lash out at trade partners. In December, Trump threatened to slap an additional 5% tariff on Mexico over a long-simmering, water-sharing dispute.

Clouds also hang over manufacturers’ heads with a coming July review of the USMCA, the trade deal among the US, Canada and Mexico. The trade pact has been a refuge for US companies from the tariff storm. This review of a successful trade agreement shouldn’t be controversial or chaotic, but somehow it probably will be.

Manufacturing tailwinds do exist. The biggest is the tax bill approved earlier this year that allows companies to write down the full depreciation of machinery and equipment in the first year, which should spur investment and output. There are anecdotes of companies looking to bring production back to the US to avoid tariffs. AI is spurring a boom of data-center and power projects. These could drive some freight demand, but it’s unlikely to move the needle, Costello said.

“Looking ahead into next year, nothing says to me, ‘Boy, there’s going to be a whole bunch more freight coming at us,’” he said in an interview.

The consumer, the second-biggest driver of truck freight, also faces a tariff burden that cuts into buying power. The tariff disruption may also impede consumers from settling back into regular consumption patterns after they began spending on experiences over goods. Companies have reacted by cutting costs, which is driving up jobless claims and could put a damper on the goods economy.

A third big driver for freight is construction, especially housing. While data centers are popping up everywhere, residential construction has been soft. Besides the lumber, steel and concrete that create trucking demand, new homes also bolster demand for appliances, furniture and other goods that are hauled by trucks. The recent Federal Reserve interest-rate reductions will help, but regulations persist that have slowed homebuilding and pushed up housing prices.

Another year of lackluster demand will likely pressure more carriers to exit the market. Trucking company bankruptcies are on the rise as rates remain stubbornly flat compared with pre-pandemic levels while inflation has driven up trucking costs.

“A supply-based recovery is much more difficult,” Costello said. “It’s painful. It’s longer.”

The Department of Transportation is cracking down on drivers who don’t meet a federal requirement for proficiency in English and on cross-border Canadian or Mexican drivers who violate rules against hauling freight within the US. The department has also taken aim at states — particularly California and New York — that issue commercial driver’s licenses to people with no legal documents or issue CDLs for a period that exceeds the expiration date on work visas.

The government relies on states to enforce highway rules, such as English language proficiency, making the crackdown uneven across the nation. The Transportation Department is correct to intercede directly to make sure state agencies follow rules for authorizing licenses that allow drivers to operate in all states. This is about safety, not politics.

The squeeze on capacity could become a problem if cargo demand were to surge next year. Companies would be scrambling to hire drivers and freight rates would spike. That would require a lot of things to go right — a manufacturing rebound or a return of consumers’ taste for goods over experience. It is an election year, so some kind of government stimulus can’t be ruled out. Trump has been pushing for sending Americans $2,000 checks.

After more than three years of cargo weakness, having a sudden demand deluge in 2026 would be a nice problem for freight companies to have. That possibility seems remote, and unfortunately that’s what it will take to snap the industry out of its doldrums.

This article was published by Bloomberg