The FreightWaves SONAR State of Freight webinar for October took place on a day sandwiched between freight market movers that didn’t move things all that much – hurricanes and a port strike – but just ahead of a consequential election in which tariffs and their potential impact on supply chains are very much on the ballot.
Here are five takeaways from Thursday’s discussion.
The bottom might have been reached
Craig Fuller, CEO of SONAR, declared: “We are at the bottom of the cycle.”
“You see it in contract rates, and again, look at the spot rates,” Fuller said. Charts in SONAR, like for the Outbound Tender Rejecti Index, show rates have “higher lows and higher highs,” he said, as SONAR Director of Freight Market Intelligence Zach Strickland showed a chart for the National Truckload Index linehaul average rate indicating a stronger market in October 2024 than in October 2023. (That rate does not include diesel.)
Fuller cited comments in the earnings report and earnings call by J.B. Hunt on Wednesday (NASDAQ: JBHT) that the trucking market was returning to “normal seasonality.”
“Everybody wants to talk about demand, but you’ve got to talk about the other side of the equation, which is capacity,” he said. “Capacity is coming out of the market. There are bankruptcies happening in our market. This is absolutely happening.”
Fuller declared that “we are about to see a great freight market.” One reason: the possibility of more and steeper tariffs if Donald Trump is returned to the White House.
Whether that policy is positive a few years from now is not relevant to the freight market now, Fuller said. Even if the impact of those tariffs is negative in three years, he said, “short term, it is stimulus” as companies race to get product into the U.S. prior to the imposition of tariffs.
“If you want to get out of the freight recession, you want to move out of this cycle, you need something to stimulate it, right?” Fuller added. “Something big. And there’s nothing bigger than the American government to do that job for us.”
Perception versus reality
Strickland noted that the Inbound Ocean Shipments Index in SONAR, before the recent port strike by the International Longshoremen’s Association, was near levels it had reached during the height of the demand-fueled post-COVID freight bull market.
Fuller commented that at that time, just a few years ago, the assumption was “we’ll never see the level of imports that we were seeing.” But with the return of big import numbers at the U.S. ports, “clearly that was wrong.”
And yet there is malaise in the market. Fuller cited the adage that “if your neighbor loses their job, it’s a recession. But if you lose your job, it’s a depression.”
He said he “gets a lot of heat” on his pronouncements on the market whether they are bullish or bearish, “because people are looking at their own experience.” And while those “anecdotes are important,” he said, “what is actually important is to look at the data.” As he has noted before, the data is showing a market that still has excess capacity. “What we need to look at is a combination of volume and capacity.” And when that observation is made, Fuller said, the conclusion is “that it’s been a pretty strong market.”
What will happen with tariffs after Election Day?
Should Kamala Harris be elected, Fuller said, a review of her policies on trade suggests that “there aren’t major sweeping changes” in policy. But Trump and his team would have a better knowledge of what Fuller called “the playbook.”
“They’ve had four years to plan their revenge, if you will, on all the policies they want to do,” he said. “And I think they’ll hit the ground running with tariffs and they will escalate tariffs. I think a lot of the things they do will stimulate real quickly.”
Trucking would likely benefit initially from Republican policies
Coming back to the point of Republican policies being stimulative, Fuller said if Trump is elected and Republicans sweep both houses of Congress, “I think you’ll see pretty significant acceleration in freight demand, because the types of policies the Republicans tend to focus on, and they’ve stated publicly, are a net stimulus in terms of domestic trucking demand.”
Among those decisions to be made in a tariff-driven economy: If imports are going to ramp up at least temporarily to bring in products before the tariffs take effect, how much do you bring in? Another issue, according to Fuller: “You’re thinking about whether I need to add warehouse space to store goods that I need for supplies.” And longer term, he said, “you need to think about reshoring manufacturing.”
Milton and the ILA strike had limited freight market impact
Fuller said that while Hurricane Milton was strong, “it didn’t stay very long.” Given that, the damage in Florida – and any resulting impact on the supply chain – was less drastic than feared. Strickland noted that inbound and outbound tender rejection rates for Florida did not soar as much as anticipated, a sign that the Florida trucking market – always a heavy inbound market and a weak outbound market with few backhaul opportunities – was not disrupted as much as feared.
As for the ILA strike, which ended just a few days after it began, Fuller questioned whether issues of automation were going to trigger another strike by the new mid-January deadline for reaching agreement on those issues. Disputes on pay were mostly settled in the deal that sent longshoremen back to work after the strike.
“So you assume the pay increases are going in,” Fuller said. “The question then is how big is automation?”
The rank and file that is going to be voting on a contract after an agreement between now and January “actually care far more about their wallets and far more about their finances near term than they do about automation.”
Those workers, Fuller predicted, “would much rather have their pay and the increases continue rather than walk the picket line again over the question of greater automation on the ports. “Do I really care at the end of the day about new members as much as I care about my own wallet?” he said.
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