Kenny Vieth discusses today's market challenges and outlook

At the recent 2025 MEMA Commercial Vehicle Market Outlook, ACT Research President and Senior Analyst Kenny Vieth shared a sobering perspective on the current state of the freight market. He opened his presentation with the candid remark, “I wish I had better news.” This statement set the tone for a discussion marked by challenges such as tariffs, inflation, and economic uncertainty, factors that have transformed what was anticipated to be a manageable correction into what Vieth described as a “low crisis era.” His insights serve as a vital reminder to fleets: the journey to recovery will be more protracted and fraught with obstacles than many had hoped.

Understanding the impact of tariffs and inflation on freight demand

One of the most pressing issues highlighted by Vieth is the burden of tariffs. The costs associated with fundamental raw materials such as steel, aluminum, and copper have surged dramatically. This escalation has driven the average tariff rate from 2.4% in 2024 to an alarming 18.6% in 2025, with projections suggesting it could exceed 22%. The implications of this increase are profound; a study from Yale’s Budget Lab estimates that the average U.S. household will incur an additional $2,400 this year merely to maintain last year’s purchasing power.

This decline in consumer purchasing power has a direct correlation with freight activity. Vieth pointed out that manufacturing output has stagnated, the housing market is experiencing a downturn, and the growth in real disposable personal income (RDPI) has significantly slowed. Together, these factors contribute to a reduction in freight movement, resulting in fewer revenue-generating opportunities for fleets.

• Tariffs are driving up costs for raw materials.
• The average household faces a significant increase in expenses.
• Manufacturing, housing, and personal income trends are negatively affecting freight demand.
• Less freight movement translates to fewer opportunities for revenue generation.

Current trends in the freight market: A 'tariff-ying' environment

Vieth characterized the current freight environment as “tariff-ying,” emphasizing the challenges posed by tariffs on the market dynamics. Data from ACT Research reveals that spot rates are stagnating against inflation, creating a widening disparity with contract rates, which now average a difference of $0.42 per mile. This gap is significantly larger than the long-term average of $0.21 per mile.

The market is further complicated by an oversupply of capacity, largely stemming from private fleets that expanded their truck inventories between 2022 and 2024. As a result, profitability in the freight sector has plummeted to its lowest levels since the 2008-2009 financial crisis. Vieth reiterated that “carriers buy more when they make more,” highlighting how the current pressure on margins is leading fleets to postpone expansion plans. Projections indicate that rates will likely not see an uptick until mid-2026, and any recovery in the market is expected to be gradual.

Analyzing equipment market weaknesses

The equipment sector is not immune to these economic pressures. Vieth reported that inventories of Class 8 tractors, vocational trucks, and medium-duty vehicles are at elevated levels. ACT Research estimates a surplus of approximately 35,000 Class 8 units, which will continue to impact production for the foreseeable future. Additionally, trailer orders have dropped to levels not witnessed since the Great Recession, indicating a significant slowdown in demand.

While prices for used trucks have increased by about 10% year-over-year, they remain substantially lower than the highs seen in 2022. Medium-duty vehicle inventories are currently around 70,000 units, but Vieth suggested that the optimal balance should be closer to 40,000, exacerbating the difficulty for Original Equipment Manufacturers (OEMs) to maintain production levels.

Signs of pent-up demand amid challenges

Despite the prevailing difficulties, there are emerging indicators of potential recovery. Notably, the average age of refrigerated trailers has climbed to an unprecedented high, signaling a forthcoming demand for replacements. Moreover, fleets are beginning to report tighter driver availability, which Vieth noted as a classic early indicator of an approaching market upswing.

However, he cautioned that expectations for a swift recovery may be misplaced. ACT Research forecasts only modest improvements until 2027-2028, when the anticipated pent-up demand could catalyze a more robust rebound in the market.

Strategies for navigating uncertainty and positioning for the long term

Jeffrey Crane, a partner at Bain & Company, provided a broader perspective on the market landscape. He noted that global trade patterns have been evolving for years, and the current surge in tariffs is hastening a significant transformation. The long-standing reliance on export-led growth has resulted in lasting imbalances, and there is no easy “reset button” to restore the stability that fleets have historically relied upon.

Crane emphasized that companies cannot afford to remain passive while waiting for clarity. Instead, they should focus on building both financial and operational buffers, actively evaluating their exposure to tariffs within their supply chains, and positioning themselves to respond more rapidly than competitors. “If you wait, it will be too late,” he cautioned.

Interestingly, while the short-term outlook remains challenging, the U.S. economy possesses inherent advantages. Only about 25% of U.S. GDP is tied to imports and exports, in contrast to nearly 60% globally. This relative independence supports a more optimistic outlook in the medium to long term, particularly as automation, demographic shifts, and ongoing supply chain restructuring reshape the commercial vehicle market.

Key takeaways for fleets navigating the current market

• Freight rates are unlikely to show improvement before mid-2026.
• High inventories and poor profitability suggest it is not the optimal time to over-order equipment.
• Considering used trucks may provide a viable solution as new-vehicle prices escalate due to tariffs.
• Companies should begin preparations: assess tariff exposure, build operational buffers, and act decisively rather than waiting for ideal conditions.
• Long-term replacement demand is in the pipeline, and the U.S. economy is positioned for growth over the next decade.

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