This time last year, logistics providers were relaying “cautious optimism” from shippers as a new post-election administration was taking over in Washington, D.C. Inflation was relatively stable. Job growth was encouraging. Consumers were still embracing e-commerce and spending, albeit prudently and with an eye toward value, on both goods and services. Freight volumes and rates seemed poised to finally tick up in an economy that appeared primed for sustained growth.
What a difference a year can make.
Heading into 2026, the freight markets remain in what may be the longest prolonged downturn in decades. Chaotic tariff policies and rates are whipsawing businesses and upending traditional global sourcing and supply chain strategies.
Shippers continue to demand more, better, faster, and cheaper technologies that give them ever more detailed visibility and control over where goods are, when they move with whom, and what they pay their carriers and third-party logistics service providers (3PLs). New regulatory mandates, as well as rollbacks of others, are shaking up the driver market and could potentially wean out what has been a persistent oversupply of truck operators, foreshadowing a potential capacity crunch.
MANAGING CHAOS, SEEKING OPTIONS
As the global trade war rages on, shippers aren’t sitting on the sidelines. They are managing in a constant world of disruption and increasingly examining any and all options to blunt the impact of tariff chaos to keep their supply chains fluid.
One strategy gaining favor is establishing “sourcing hierarchies” that enable a quicker response to changes and provide some measure of flexibility—and stability—for supply chains facing unprecedented uncertainty, notes Michael Castagnetto, president of North American surface transportation for global supply chain services provider C.H. Robinson.
It’s a play on sourcing diversification, and while not a new concept, “the urgency and scale at which it is happening is,” says Castagnetto. “The conversation has evolved beyond a simple China-plus-one or -two strategy. What we are seeing now is more intentional … [interest in] a tiered sourcing hierarchy that acts more like a framework for prioritizing geopolitical stability, business continuity, and cost efficiency,” he’s observed.
“If you just switch a chunk of your sourcing or production from one country to another, what works today may not work tomorrow,” he emphasizes.
A tiered hierarchy strategy “gives you the ability to make much more strategic adjustments,” explains Castagnetto. That’s because every sourcing decision influences not just product purchase or manufacturing cost and potential duties, but also downstream logistics decisions like port and carrier selection, shipment timing, choice of mode and speed in moving the goods, warehouse selection (do I use a regular warehouse, a Foreign Trade Zone, or a bonded warehouse to minimize or delay duties?), and even how last-mile delivery is engaged.
He shares one recent example of the tariff chaos and compliance complexity facing shippers. C.H. Robinson had to quickly understand, determine the impact, and then manage “400 more product categories [that] were added to the 50% steel and aluminum tariffs [announced] on a Friday and went into effect on Monday, even for products that were already in transit,” he recalled. That’s where Robinson’s Customs team stepped in and helped the client resolve the challenge to ensure the goods were not delayed and had the proper duties applied.
TIP OF THE SPEAR
Companies with extensive product sourcing overseas have been at the tip of the supply chain spear in dealing with today’s environment. Planning for the coming year has been one of the most challenging and complex of his career, notes John Janson, vice president of global logistics for branded apparel distributor SanMar, which operates some 10 distribution centers in the U.S. and has been shipping some 100,000 parcels nightly during peak season. SanMar sources from 24 countries globally.
“We have had to really work hard on being resilient and understanding that the unexpected has become the norm,” he says. Geopolitical turmoil and shifting tariffs “have definitely impacted us. We’ve had to realign significant portions of our supply chain,” he says, noting that SanMar made a big move, relocating major portions of its production capacity from Africa and other high-tariff regions to Jordan, Egypt, and India.
That meant changes in ocean carrier selection, vessel schedules, transit times, and ports of call and subsequent inland transport needs, all of which need to be carefully planned out and executed. “That puts more pressure on East Coast ports,” he notes.
One positive for SanMar: the opening of its ultra-modern automated fulfillment warehouse in Ashland, Virginia, a 1.2 million-square-foot facility that can reach points east of the Mississippi in one or two days and needs 50% less staffing than a non-automated site.
Janson is planning for a 2026 that “looks a lot like 2025,” with one big caveat: “The impact of the tariffs on consumers has not hit yet,” he emphasizes. Janson also does not see the freight recession letting up until late second quarter, at the earliest. For his parcel needs, he remains a committed customer of UPS, choosing to play “the long game” and building a deep, collaborative relationship that will serve him well in times of loose or tight capacity.
One constant Janson expects in the new year: “There will be more disruptions, and we have to plan for that.”
FOCUS AND PRIORITIZE
It’s no secret that the new year is bringing a boatload of disruptive issues and challenges to shippers’ docks, warehouses, and supply chain teams, the depth and breadth of which can seem overwhelming. Managing it all effectively requires focus and prioritizing what to attack first.
Brian Whitlock, vice president–research analyst for the advisory firm Gartner Inc., recommends that logistics and transportation service providers focus on three objectives going into the new year. The No. 1 challenge, in his view, is “scaling the network to match demand as it is today and projecting it even further. Ocean continues to decline. Air freight is softening. Trucking [particularly truckload] has too much capacity,” he says. The challenge is scaling for today’s demand but not cutting so much capacity that “you’re caught on the short side when demand picks up, and it eventually will.”
Second is “focus on your value proposition for customers. It’s a very competitive market right now [for trucking and logistics services]. Customers have choices,” he notes. “Focus on solving their most pressing supply chain issues and minimize the complexity [shippers] have to deal with.”
Third, he says, is that “3PLs have to do a better job providing access to technology and delivering it,” adding that respondents interviewed for his research expressed continued dissatisfaction with 3PL tech offerings.
Outdated technology capabilities is a key reason why shippers bring outsourced services back in house, he notes. The most common complaints: lack of innovation, current offerings that perform poorly, and outdated tech that lags behind that offered by 3PL competitors or software-only firms. “Companies want [technology that provides] greater control and visibility so they can be more resilient, respond to supply chain disruptions more effectively, and better manage costs,” Whitlock notes. “That’s where the value is, and that’s what they’ll pay for.”
NO CRYSTAL BALL
The vagaries of the trucking market and its many influencing factors have made trying to time a turnaround an exercise in futility. “I’ve put my crystal ball away; I think it’s broken,” quips Greg Plemmons, executive vice president and chief operating officer at LTL (less-than-truckload) carrier Old Dominion Freight Line (ODFL), the industry’s No. 2 revenue performer with $5.8 billion in annual sales.
“The word of the day is ‘uncertainty.’ In uncertain times, businesses are hesitant to invest heavily in expanding, growing their markets, buying new machinery, modernizing, [and] building inventory, all the things that drive volume for us,” he points out.
And while ODFL, like most major LTL carriers, is accustomed to the industry’s boom and bust cycles, “this downturn has been especially long, something like 33 out of the last 36 months,” he says.
ODFL has stayed true to its playbook, Plemmons emphasizes, “investing ahead of the cycle, maintaining market share in times like this, and [ensuring it’s] ready to grow fast when industry capacity tightens up.” The company consistently maintains excess capacity in its network of about 25%, which as 2025 concludes, has risen to above 30%. It also has several major facility expansions that are completed but are not yet open. “We don’t need them right now but will need them when the market turns—we can flex that muscle when needed,” Plemmons says.
Overall, Plemmons believes “there is still tremendous opportunity in the LTL space,” where ODFL has about a 12% share of the market. He also has found that while shippers cite uncertainty as their top concern going into 2026, there are signs of optimism—and pent-up demand waiting for some signs of stability.
LTL carriers appear to be generally holding the line on pricing and are focused on optimizing the asset capacity and business they have. Yet as truckload capacity continues to shake out, more freight will gravitate back into LTL, Plemmons believes.
“We expect that shift back when spot rates move in an … upward direction,” he notes. “We will continue to see some carriers in [the truckload] space fail, and that will be a positive for the LTL market.”
At LTL carrier A. Duie Pyle, which in 2025 wrapped up its 101st year of operation, Chief Commercial Officer Frank Granieri shared his views on key developments in 2025 and expectations for 2026, which aligned with comments from other industry executives interviewed for this story.
Among those 2025 trends were significant growth in process automation enabled by AI (artificial intelligence), a stubbornly persistent freight recession that kept rates depressed, and the unprecedented disruption from tariff disputes—and the resulting uncertainty—that put a damper on shipper activity across the supply chain.
Going into the new year, Granieri believes “carrier pricing discipline will be key amid uneven demand and rising operational costs” such as insurance, maintenance, and the expense of running aging fleets. He also expects the market to continue consolidating “as weaker carriers exit due to financial pressures and regulatory challenges.”
He’s cautiously optimistic about more capacity leaving the market, leading to improved rates and better margins for truckers. And he expects customers to continue clamoring for more digital services and process automation. “They want automated visibility and reduced manual reconciliation,” he says, as well as deeper integration with ERP (enterprise resource planning) and WMS (warehouse management system) platforms.
THE END OF THE DRIVER SHORTAGE?
For years, some industry watchers have claimed that trucking is facing a driver shortage. Yet particularly in the truckload arena, many are pointing to an opposite scenario—an oversupply driven by a surge of entrants, mostly independents with one to five trucks, over the last five years.
Today, there are at least 580,000 truckers that own and operate at least one truck. And those one-truck operators who have managed to stay in the game are at the heart of the industry’s excess capacity problem, say industry observers.
“You can buy a used truck for $25K, get insurance, hang out a shingle, and you’re in business,” notes John Vaccaro, president of Bettaway Supply Chain Services, which operates a dedicated fleet of 125 trucks and 700 trailers.
“It’s been a surge of oversupply by thousands of one-truck operators—fast to come to the table and with endless staying power if all they are supporting is a single eight-year-old truck with minimum insurance,” he says. That oversupply of independents has prevented the usual supply/demand equation from leveling out as it would during a normal cycle, Vaccaro says.
Small carriers, however, are now leaving the market, driven out by pervasive rock-bottom rates and escalating operating costs. Also, two recent regulatory mandates appear to be accelerating the pace of departures. Among those are new restrictions on “non-domiciled” drivers.
Introduced in 2017, this policy provided a path for drivers living in one state to get a license in another. It eventually was expanded to include non-U.S. residents, who may or may not have had proper work permits or met all necessary legal requirements to work in the U.S.
One industry estimate, citing a government audit, found that some 200,000 non-domiciled driver’s licenses had been issued in the U.S. In one industry executive’s view, those new participants have been the principal cause of the market’s excess supply situation and the reason why the industry has suffered from the longest freight recession in decades.
Earlier this fall, the U.S. Department of Transportation (DOT) began notifying states of new restrictions on licenses issued to non-domiciled drivers after a federal audit found licensing violations. The audit claimed California was among six states that had issued commercial driver’s licenses (CDLs) to non-citizens improperly. California state officials subsequently announced it was revoking 17,000 CDLs issued to immigrants, where the license expiration dates exceeded the time those individuals could legally be in the U.S.
Nevada also announced last month the cancellation of some 1,000 non-domiciled commercial driver’s licenses. The state found those permit holders were not in compliance with the Sept. 29 interim final rule issued by the Federal Motor Carrier Safety Administration. Nevada also has stopped issuing new licenses to drivers who live outside the U.S.
Then there is the English-language proficiency mandate, issued last May by the Trump administration. This requires a CDL holder operating a truck to demonstrate functional proficiency to read and speak English sufficiently to converse with the public, understand English traffic signs and signals, respond to official inquiries, and make entries on reports and records. That’s led to more violations and drivers being placed out of service for noncompliance, potentially shrinking the capacity glut further.
Vaccaro believes the market correction is two years past due—a delay “fueled by endless cheap truck capacity” from the thousands of one-truck operators who have been hanging on. “The administration’s current focus on enforcement is putting a spotlight on a changed dynamic that went greatly unnoticed and unaccounted for,” he says. “It’s showing early signs of measurable capacity removal. Once the spigot is shut off and the economy gains momentum, supply will regain control.”
