The 2:00 Minute Warning

Even though we are still in August, I’ve heard from several companies that are asking for guidance on issues and factors they should consider as they plan their budgets for 2026.

No surprise that the tariff issue is at the top of that “issues and factors” list, but there is another very important issue to consider. And that issue is the impact of the “freight pendulum.”

TranzAct has helped hundreds of companies over the years lower their freight costs and prepare more accurate freight budgets. Often times when we are brought in, we urge companies to consider the “cyclicality” of the freight markets when it comes to preparing better budgets and also understanding things that could affect their supply chains.

For example, in 2020 - 2022, with tight supply and strong demand in the freight markets, we saw strong increases in freight rates – especially in the ocean sector where the cost of moving containers skyrocketed. However, in the middle of 2022, we saw the beginning of the most significant freight recession in modern memory. 
This recession has gone on for over forty months and continues today. I’ve stopped counting the conferences I have either attended or spoken at where the CEOs of some of the largest carriers predicted when this recession will end.

But when some very large and strong carriers such as UPS and JB Hunt tell the markets they are suspending issuing financial “guidance” for the third and fourth quarters of 2025 due to the uncertainty in the freight markets, it sends a very powerful message: No one really knows when this freight recession will end. 

Obviously, time constraints preclude us from having an in-depth discussion about how the tariffs and freight pendulum will affect your 2026 budget. Here are a few things to keep in mind. If you’re looking for guidance specific to your company or market conditions, or would like to ask questions, I encourage you to schedule a time to meet.

Using Scenario Planning to Address Market Uncertainty

One of the things we encourage people to keep in mind is that there’s a tremendous amount of uncertainty in the market. Last week I met with a group of senior supply chain and logistics professionals, and to a person, they all talked about the challenges of managing in a world with so much uncertainty. Will the tariffs induce an economic recession? Will the economy stabilize with stronger quarterly GDP numbers as we progress through 2026?

No one knows the answers to these questions. But one thing we do know is that the constant changes in the “tarrifying” world are causing companies to postpone making investments until they have a more clear picture about what to expect.

With that thought in mind, we have had discussions with shippers that are using a scenario based budgeting process that provides numbers based on which scenario actually occurs. For example, if there is a recession, will there likely be lower or more moderate increases in freight rates and lower costs overall? If the bonus depreciation in the recently passed tax act drives investments, will the economy be stronger with higher freight rates? Overall will there be a return to "business as usual" despite greater uncertainty?

Freight Pendulum

As noted above, one of the questions at the top of the list for a lot of carriers and shippers is will this record-breaking freight recession that we’ve been in for over forty months continue?

While it's hard to say whether or not that will occur in 2026, largely due to the influence of tariff policy, we're expecting the market to shift back in favor of the carriers at some point. The reason for this is that even if there is uncertainty in the markets, we are seeing some unhealthy issues which could cause more carriers to leave the marketplace and tighten capacity.

For example, when a respected carrier like Carroll Fulmer recently shut their doors after being in business for over 70 years, that also sends a message: As more carriers leave the marketplace, or finding drivers becomes more challenging due to things like the English Language Proficiency Act, demand will tighten and rates could go up - especially in the TL sector.

In the LTL market, as we have noted in previous Two Minute Warnings, shippers have an unusual opportunity to potentially lock in even lower rates for 2026 depending on their shipping profile, as LTL carriers face different challenges.
 
Practices and Processes

Finally, as you plan your 2026 budget, think beyond rate negotiations – think strategically. As we have proven through our Strategic LTL Assessment, irrespective of what’s going on in the market with rates, there are things that shippers can do to reduce their supply chain costs by as much as 10% - 12% by making changes to their practices and processes. When you’re a best-in-class shipper or a shipper of choice by implementing better practices and processes, everybody wins. Carriers can more efficiently serve your business with lower rates and your company can actually reduce freight costs through being more strategic.

There’s a lot more to consider, and we’re available to provide further advice. If you’re interested in learning more, give me a call at 630-833-0890 Ext 190, send me an email, or schedule a time to meet via Calendly.

BY MIKE REGAN, CO-FOUNDER OF TRANZACT

CONNECT ON LINKEDIN

LET'S TALK! BOOK TIME WITH ME