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Trucking Gained in Q1 as Supply Tightened, Costello Says
ATA Economist Warns Recovery Faces Tariff, Inflation and Energy Headwinds
Key Takeaways:
- ATA Chief Economist Bob Costello said first-quarter trucking conditions improved mainly because supply has been shrinking for years.
- New federal standards on licenses and language proficiency are contributing to reduced trucking capacity.
- Freight demand remains uneven and vulnerable to tariffs, higher fuel costs and inflation.
American Trucking Associations Chief Economist Bob Costello warned that trucking faces headwinds even as supply contractions drove first-quarter gains.
The Department of Transportation bolstered ongoing supply-side reductions when the Federal Motor Carrier Safety Administration tightened standards on non-domiciled commercial driver licenses and English-language proficiency. The move came amid a prolonged freight downcycle that has struggled to reverse course because of a surplus in supply relative to demand. The new policies directly target that supply.
“We saw a better state overall when considering both demand, and most importantly supply, factors in the first quarter,” Costello told Transport Topics. “The supply environment has improved. It’s been a long time coming, supply has been whittling down for years.”
Costello credited both ongoing market factors and the government policies with pushing supply down. He has also seen promising tailwinds from artificial intelligence investments and fiscal policy after the One, Big, Beautiful Bill Act.
Tariff Rate Still Elevated
But this is coming against major headwinds.
“Even though the effective tariff rate has come down, they’re still much higher than we have historically seen since the 1930s,” Costello said. “The war in Iran started in the end of February. That has led to a lot of issues, especially around energy prices, and then inflation.”
ATA Chief Economist Bob Costello breaks down what’s driving the freight economy and some of the headwinds still holding it back. #MYMS26 pic.twitter.com/WRK2HUmGHZ — American Trucking (@TRUCKINGdotORG) May 18, 2026
The Q1 2026 U.S. Bank Freight Payment Index found that national shipment volume slipped 0.3% from the prior quarter, while shipper spending rose 12.9%. This represented the largest sequential spending gain since late 2020. On a year-over-year basis, shipments inched up 0.6%, and spending climbed 21.8%. This reflected tighter capacity, higher rates and fuel surcharges.
As higher fuel costs push up inflation, consumer spending power is increasingly split, with higher‑income households holding up better than everyone else, putting pressure on freight demand tied to everyday purchases.
“They’re not going to be able to buy as much, especially in this, what’s called a K‑shaped economy,” Costello said.
Strong Performers
He added there are a couple of areas in which manufacturing output has been fairly strong, such as data center construction and airplane production. But that has not been the general trend he has seen across the sector. He also noted that even the lanes doing well don’t produce a lot of freight, relatively speaking, with overall factory output being flat to down.
“There are some fleets that are saying freight is good, others that are saying it’s not,” Costello said. “If you’re a flatbed driver and you’re doing things that are going to build data centers, probably things are quite good.”
Costello has heard this reflected in the fleets he has been speaking with more recently. But he has had to caution some that are doing well that conditions aren’t as strong overall since the supply-and-demand rebalance has not been even across all lanes. He has noted that while demand has been doing OK, the freight recovery that appears to be forming is overall supply-driven.
“I would feel much better if there was more demand percolating underneath,” Costello said. “But even without that, I think, this still has legs. This still has a runway. In fact, I would expect it to continue through this year.”
Caution Against More Supply
Costello warned that the main development that could kill a supply-side recovery is more supply coming into the market. But he is optimistic some of the new government policies will help limit the number of new carriers and drivers entering the market, as well as equipment purchases.
“I would argue, at least for now, that there’s enough speed bumps on how much these folks can order,” Costello said. “Some of that has to do with higher inflation in general, but certainly impacting truck pricing and the tariffs on the trucks from Mexico, and just tariffs in general.”
