Those of you who are fans of Mel Brooks’ films will recognize that line from Young Frankenstein. Those of you who are not should check out the movie for a couple of hours of laughs.
The scene in which the line takes place involves the retrieval of the body to be reanimated by Dr. F. Dr. F remarks the undertaking is difficult. Igor, his assistant, replies with the line above and it promptly starts raining.
Why am I telling you this?
Because, as one tasked with commenting about current and prospective conditions in the trucking industry, about the only thing that would make the task more onerous would be to do it in the rain.
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Since the turn of the year, we have known 2026 would be a very challenging year. Even before the outbreak of hostilities in Iran we already had a full slate of problems to consider in the formulation of an outlook for activity in the trucking industry.
Principal among those were concerns about inflation, the legality of the first round of tariffs, the future of USMCA and changes in the conduct of monetary policy.
We have answers to some of those questions.
Inflation, largely because of the war in Iran, is much worse and a much bigger problem. The first round of tariffs were found to be illegal but were replaced by another round of tariffs. USMCA negotiations are pending, and the outcome is still uncertain. We have a new chair at the Federal Reserve and, based on the results of his first press conference, a new approach to monetary policy.
What does this tell us about the prospects for the profitable hauling of freight and its attendant maintenance functions going forward?
The sharp rise in freight rates, spurred mostly by the fuel surcharges associated with the spike in diesel prices, is the first but not the last manifestation of inflation. Still to be seen are second round of price increases stemming from the higher cost of inputs and the higher cost of moving goods through the system. It will probably be another six months before the full effects show up in the major inflation metrics.
In addition to the items in the supply chain carrying higher costs, we have the issue of the supply chain itself being subjected to another interruption similar to that which followed the COVID-19 lockdowns in 2020. While the closure of the Strait of Hormuz does not affect global ocean shipping traffic to the degree the pandemic closures did, we can expect bottlenecks to develop until the shipping capacity that has been prevented from transiting the Strait in both directions gets back into regular service.
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The result of all of this is likely to be continued turbulence in the setting of freight rates with the attendant uncertainty and discontent on both sides of the market. Volatile rates make for both volatile profits and unhappy customers.
We should know something fairly soon about the future of USMCA. The question will be whether one or more of the three parties decides they want to go to the annual review protocol rather simply extending the treaty as written through 2036.
Two items emerged from the latest meeting of the Federal Reserve’s Open Market Committee. First, it appears new chair Kevin Warsh is going to make good on his promise to end the “forward guidance” practice used by the past four Fed chairs. This could increase the volatility of fixed-income securities prices and make borrowing costs harder to predict. Second, there appears to be a consensus among the members of the Committee that the Federal Funds Rate, which is the target rate of interest, will not be going down in 2026 and may, indeed, rise before the end of the year.
All of which suggest that our January forecast for 2026 being a very challenging year is still the right forecast.
