Depending on where one might read, watch or listen to news, there are varying reports about the state and health of the US economy.
On the heels of his presentation at the Truckload Carriers Association’s annual convention in Phoenix, Bob Costello, who serves as the chief economist and senior vice president for the American Trucking Associations (ATA), sat down with The Trucker Media Group last week to expound a bit on what he believes is the state of the trucking economy.
Costello did specify that there was a profound difference in the overall economy and the trucking economy.
In explaining the difference Costello says that GDP related to trucking is more about product rather than services.
“I say ignore [GDP slowing] because almost 70% of what is embedded in those GDP numbers are services, and you’re not putting services in trailers.” Costello said. “So, we need to focus in on the goods economy.”
As an example, Costello cited the way the U.S. economy responded during the COVID-19 pandemic in 2020: The consumption of goods skyrocketed, but the much of the nation was at home and not attending concerts, sporting events, etc. because of restrictions and health concerns.
So, what does the GDP look like without the services? Costello splits his analysis of the economy, calling it the “experience” economy rather than services when referring to concerts, sporting events and the like.
“Tangible goods — we weren’t traveling, we weren’t going to concerts, we weren’t going to sporting events. And then you fast forward a couple of years later and the complete opposite happened,” Costello said. “Goods spending really slowed down and experiences spending boomed, right? Taylor Swift, revenge travel, you name it, all this stuff.
“And while you need truck movements associated with [things like] that, it is a lot less per dollar spent than when we buy a good,” he continued. “And therefore, trucking enters a recession.”
Costello admits there was some optimism about a lifting of the recession this year, but he also admits to a level of uncertainty.
“But now you have some policy changes that are starting to cloud the horizon,” he said. “If we get these tariffs on Mexico and Canada at a 25% level, that just changes everything.
“What do you think is actually going to happen? I think it’s as good of a guess as anybody’s,” he continued. “We’ll know in pretty short order.”
It could be as soon as April 2, when President Donald Trump says tariffs are back on — including reciprocal tariffs.
Tariffs on steel and aluminum are already making a mark, and it could get worse.
“I’m hearing that’s about $3,500 per truck in extra cost,” Costello said. “That’s not going to feel good for those people buying those trucks, assuming that gets passed along.”
Costello does not have a crystal ball to predict the future of what the Trump administration will do, but he did say that what is currently happening, including an unstable stock market, is “adding uncertainty.”
Another layer to Costello’s talk in Phoenix was the fact that ports around the country could begin charging import fees of $1 to $3 million to certain carriers.
“This was started in the Biden administration,” Costello explained.
Five labor unions petitioned the United States trade representative under Biden to take remedies against China for “essentially dumping cargo ships onto the market.”
Reuters reported earlier in March that the United States is planning to charge fees for docking at U.S. ports on any ship that is part of a fleet that includes Chinese-built or Chinese-flagged vessels and will push allies to act similarly or face retaliation, citing a draft of an executive order.
Reuters reported that the purpose of the action was to resuscitate domestic shipbuilding and weaken China’s grip on the global shipping industry.
“The Biden administration did a review, and they essentially took it all the way to the to the one-yard line and then left it for the Trump administration folks to decide what to do with it.”
The Trump Administration has the order, but the action is not final yet.
There will be a comment period. In fact, the ATA, as well as a few other trucking groups, are set to submit comments later this week.
In simple terms, the order means a Chinese shipping company or another country with Chinese using a Chinese ship, or a company with Chinese ships in its fleet would be charged $1 million to $3 million dollars to enter a U.S. port.
While the amounts are unclear, the amounts could be cumulative which could push the fines up to $3 million.
The result could be fewer outside ships stopping at multiple ports in the U.S.
“What’s most likely to happen in all three of those situations is [that a] ship line would make one port call to reduce that [charge], because every time they go to a port, it’s a million, a million and a half — up maybe up to $3 million,” Costello said. “But let’s just say a million. Even at a million, they’re going to make much fewer port calls.”
For example, coming from Asia, Costello said he could see where ship lines go to the port of Los Angeles or Long Beach, and that’s it.
“They don’t go to Oakland, they don’t go to Seattle, Tacoma — and think about what that does,” he said.
Costello also said estimates exist predicting that up to 5% of freight could simply steer clear of the U.S. altogether, opting for ports in Mexico or Canada.
“On the East Coast, where it’s a lot more diversified, it’s even a bigger issue,” Costello explained. “And so, they may only go to Savannah. They may only go to New York, New Jersey.
“But this is also in turn going to hurt exporters because there’s a lot of manufacturing activity in the southeast, in particular in Alabama, that goes to the Port of Mobile,” he continued. “I could totally assume shipping companies are thinking, ‘Nope, we’re not going to Mobile anymore.’ And so now what are those exporters going to do? There’s going to be higher costs through the whole system.”
Such a scenario, involving not only higher tariffs but also exorbitant port fees, could cause a ripple effect “very quickly” according to Costello.
“It’s not final, but people need to be aware of it because it would have significant impacts,” Costello added. “That, to me, is the lead in all this.”
Bruce Guthrie is an award-winning journalist who has lived in three states including Arkansas, Missouri and Georgia. During his nearly 20-year career, Bruce has served as managing editor and sports editor for numerous publications. He and his wife, Dana, who is also a journalist, are based in Carrollton, Georgia.
