Election to strongly impact freight economy

FreightWaves SONAR State of Freight hosted a special edition of its monthly webinar Friday to discuss how the outcome of the U.S. presidential election could affect the commercial transportation industry.

With only four days until voters decide between Democrat Kamala Harris and Republican Donald Trump, FreightWaves SONAR CEO Craig Fuller and Senior Analyst Tony Mulvey drilled down on the possible impact of each candidate’s policies on the freight market.

Here are five takeaways from Friday’s discussion.

Federal policies have a major impact on the freight industry

Federal policies can significantly affect the freight industry in a number of ways, according to both Fuller and Mulvey.

“If you think about the freight economy, it’s so big, it’s so massive, because about 32% of the U.S. economy is tied to logistics-dependent industries,” Fuller said. “It means that these businesses simply cannot exist without logistics, and so policy has an enormous amount of impact on freight.”

Fuller cited policies that shape labor, taxes and tariffs on foreign goods as examples.

“Things like labor policy, whether we’re talking about the port strike that was short-lived and could potentially happen in January, is one thing. Tax policy, which drives goods and manufacturing demand, consumer consumption, those things are actually really important. Tariffs are obviously really important,” Fuller said.

While higher tariffs on imports could be a catalyst to bring more manufacturing back to the U.S., they also have the possibility of hurting companies and consumers, Mulvey said.

“If it’s a blanket tariff, 10%, 20%, it does at some point eat into the company’s profit margins to some degree,” Mulvey said. “Companies are going to offset that by raising prices. I think overall, there is some risk to higher prices on certain goods.”

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How could tariffs on foreign imports affect the freight industry?

If Trump is reelected, he has floated the idea of taxes on imports from all countries shipping goods into the U.S. and as much as a 60% tax on imports from China.

How tariffs could affect the transportation industry and the U.S. economy has already been demonstrated in Trump’s first term, Fuller said.

“If you look at what happened during the first Trump administration, we didn’t see rapid inflation,” he said. “There were tariffs put on China during the first administration. This is at a time when the global economy, and particularly the Chinese economy, was doing exceptionally well. Their economy is now at risk of actually contracting. There is a lot of excess capacity in the Chinese economy. So putting these tariffs in place probably means that those Chinese exporters have no choice but to lower the prices to be competitive. Because they don’t, they won’t be able to export anything, and the entire Chinese system is based on exports.”

Election could determine growth trajectory of US energy production

Both Harris and Trump have said they want to expand U.S. energy production.

The main difference is that Harris is calling for energy policies that also take into account climate change and clean energy technologies. Trump has said he wants to roll back regulations that hinder oil and gas drilling and coal mining.

Fuller said removing regulations that restrict U.S. oil and gas extraction will help the economy and benefit consumers with lower energy prices.

“We have so much oil and gas under our feet, but we can’t get to it cheaply, refine it cheaply enough, because of all the environmental regulations,” Fuller said. “If we remove those, and we start to really create more supply, the cost of energy comes down. And that money, versus going overseas, stays in our economy. It is so beautiful.”

China wins if US goes all-in on electric vehicles

Fuller said the future of domestic energy policy will play a vital role in the U.S. economy.

“China is going to wipe us clean if we move to full electric vehicles,” he said. “China doesn’t actually have big fossil fuel reserves; they consume more energy than they produce. The West, Europe and the United States lead the world in internal combustion engines. The reality is that if we go full electric vehicles, we will lose to China because they have something like 300 original equipment manufacturers that produce electric vehicles. What has happened is the Biden administration woke up to this reality. … [W]e’re losing market share, which is why they put tariffs on China to begin with. If we are willing to give up our lead as a global economy — and auto manufacturing is incredibly important — but if we give that up, we will lose to China. We have to protect the industries of which we lead, and we can continue to develop technologies that make fossil fuels cleaner and hydrocarbons cleaner.”

US foreign policy could also play major role in the election

U.S. aid to Ukraine in its war against Russia and financial support of other nations could be a topic on a lot of voters’ minds, Mulvey said.

“I think about the U.S. economy, how important it is to the global economy. Our government spends money left and right, feeding and funding these other economies to some degree,” Mulvey said. “You look at the amount of money just put into Ukraine over the course of the last two years now. It’s an enormous amount. I think it’s just one that catches people’s eye because we’re spending all this money here domestically too. That just doesn’t necessarily get seen as much.”