Long-term gains?
Larkin’s outlook is buoyed by a belief that the Trump administration’s moves through the first half of the year will benefit the overall trucking industry. “Historically, the Congressional Budget Office always underestimates the amount of economic growth created by lower taxes and pro-business policies, and I think that will be the case this time around,” he argued. The long-term “stimulative impact” of those moves will include bringing manufacturing outsourced to other countries back to the United States, he said. “At the end of the day, industrial production is the variable most highly correlated with trucking volume,” Larkin said.
“It’s difficult to have a strong trucking environment with flat industrial economy.”
He also pointed to the federal government’s tariff-aided $27 billion budget surplus in June—its first June surplus since 2017—but Marten Transport CEO Tim Kohl wasn’t swayed. “Consumers are going to pay for that,” Kohl countered.
“The tariffs are utterly insane. Our industry can’t afford the tractors now.”
Kohl concurred with Larkin’s assessments of the labor market, which remains tight, and inflation, which is frustratingly persistent. And while Larkin acknowledged tariff uncertainty is slowing trucking’s recovery, he insisted cutting the interest rate—an action Federal Reserve Chair Jerome Powell has refused to take with inflation still hovering at 2.7% in July—would fuel the economy by boosting the housing market, particularly when it comes to new builds.
“Interest rates are too high,” Larkin said. “They’re discouraging investments, which reduces freight volumes.”
Lingering overcapacity is complicating stagnant freight demand, he added, blaming brokers’ quick-pay programs and financiers’ leniency for allowing “fly-by-night” operators to hang on; and Wendell Erb, president and CEO of Erb Transport, agreed. “If financiers bring trucks back, they’re just going to dump them and take the loss,” Erb said. “So, rather than taking a big loss at an auction sale, and writing off the equipment, they’re letting those guys keep going.”
Short-term frustration
Reefer demand has held stronger than dry van demand, Larkin said, citing data from Morgan Stanley Research. Spot reefer rates haven’t fared as well, “but the last couple of months have looked better, which may indicate some tightening of supply and demand,” he added; and FTR’s July data support that notion. But reefer carriers also face unique challenges—including the growing popularity of appetite-reducing GLP-1 medications like Ozempic. “This is having a big impact on the volume of freight moving in the refrigerated sector,” Larkin asserted.
“It’s a very interesting phenomenon.”
The farm-to-table and work-from-home trends are also reshaping reefer logistics.
Restaurants offering freshly harvested food will source 35% of their ingredients from local farms this year, up from 12% in 2020, according to a Metrobi report. “This trend is not fully played out,” Larkin predicted. “You’re going to see more and more local sourcing in the search for freshness, and that’s going to have a negative impact on long-haul transportation.” At the same time, more U.S. fruits and vegetables are coming from centrally located farms in Mexico, according to the USDA; and, to a lesser extent, Texas. “California used to be the be-all, end-all for produce, creating a huge amount of long-haul opportunity,” he said.
The increase in people working from home is reducing restaurant consumption, particularly in big cities, Larkin said. Inflation is exacerbating the issue, leaving people with less disposable income, Kohl added. “We saw better grocery business from the big grocers [in July] than we had been seeing, but the restaurant business is still tailing off,” he noted. “And that will continue because people can’t afford to eat out. They’ve got to cut their budget somewhere.”
