Just when some aspects of the freight market were starting to calm down, there’s a new factor that has the potential to inject renewed volatility into supply chains.
That was one of the points made in the June State of Freight webinar featuring Firecrown and SONAR CEO Craig Fuller along with Zach Strickland, SONAR’s director of market intelligence.
FreightWaves’ State of Freight webinars the past few months took place against a backdrop of tremendous volatility and uncertainty in freight markets. Fuller and Strickland saw some aspects of the supply chain growing somewhat calmer, but also discussed a change in a key benchmark from the SONAR data dashboard that could be signaling any calming might not last.
Here are five takeaways from the June State of Freight webinar.
An OTRI spike and what it means
The Outbound Tender Rejection Index in SONAR has moved up sharply in the past few days. Fuller said it could be the first signs of tightening capacity because of the English Language Proficiency requirement that began a renewed round of enforcement this week.
The impact of enforcing the ELP–which is not a new regulation, but is getting a new enforcement push from the Trump administration–goes well past having a driver taken off the road because he or she failed the ELP during a safety stop.
Out of Service orders that would accompany a driver being taken off the road end up on the records of a carrier, Fuller said. “If you’re a fleet and you have an out of service violation, this time is recorded on your record,” Fuller said. “And what’s interesting about that is that it shows up in your insurance rates. It also means some shippers will not book you if you have a lot of out of service violations.”
That recent spike in tender rejection rates could be a sign of carriers taking drivers off the road rather than have them become the focus of an Out of Service order that results in that mark on a company’s record, according to both Fuller and Strickland.
Has the trade war run its course?
Fuller was 50-50 on whether to call the trade war that was raging in April and into May “an afterthought.” “It has become sort of that, but you’re still dealing with it,” he said. Fuller said he saw evidence in the news cycle that “the administration seems to have largely moved on.”
But Fuller also noted that the 90-day deadline on other countries cutting trade deals with the U.S. is coming up fast. (The 90-day pause on many tariffs was announced April 9). “My guess is they just end up extending them out because tariffs were far less popular among the independents and obviously the bond market,” he said, referring to the sharp spike in Treasury rates when “Liberation Day” tariffs were announced.
Speaking of the U.S. bombing of Iranian nuclear facilities, Fuller said “I think it seems to be that’s where the administration is focused on. It has moved on from trade, and I think it’s a positive for everybody.”
The Vietnam and Thailand dance
Fuller and Strickland discussed the Trade War Center on SONAR and what it is saying about ocean shipments. Strickland noted that the dashboard shows that ocean going volumes are now running above last year, “and if you recall, last year was a strong year for import activity,” he said.
And a lot of that ocean going traffic is coming out of Vietnam and Thailand, which Fuller said is an effort to take Chinese-made goods, transship them through those countries and avoid the steep tariffs on Chinese imports.
“A lot of transshipping is going on,” Fuller said. “It’s nearly impossible to know how much it is.” He added that there are estimates as much as 70% of U.S. Imports from Vietnam could be goods that were transshipped from China, but he also has seen estimates as low as 30%.
A tepid prediction for LTL
Strickland, who came out of the LTL business, said he “thought LTL was going to come out in much better shape through all this, just because the industrial sector is dying to wake up and is ready to go.”
But Strickland said he now believes LTL won’t perform any better than a recovery in truckload, which remains in the doldrums.
But Strickland had optimism for the truckload sector, which could drag LTL along with it. “I think the truckload market will flip, and I think we’re close to it,” he said. “What’s going to happen is the truckload market is going to have an inflection point and then that’s going to trigger a downstream reaction into LTL.” He added that he believed September or October might be a period when that “flip” would occur.
But LTL is ultimately tied to industrial activity. “And on the industrial side of things, we need economic certainty or clarity,” Strickland said.
Electric vehicles face a big headwind from Washington
“The biggest thing you can take from the Big Beautiful Bill is that the administration is very anti-EV now,” Fuller said. He noted the various incentives for electrification that were in the Inflation Reduction Act are being terminated in the legislation passed by the House and now before the Senate that carries that BBB name.
As a result of that, Fuller said, “the pressure to electrify is off somewhat, because fleets no longer feel that this is a necessary thing they have to contend with,” Fuller said.
He also noted a statement made by a leading U.S. Volkswagen official in the U.S. who said that customers were going to be offered EVs aggressively because of the huge pool of money the IRA provided to incentivize EV purchases. But that pool of money is now drying up. “If you look at the bill, we’re changing directionally,” Fuller said.
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