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The State of the Trucking Industry Today and Looking Forward

Despite several challenges, 2018 was a strong year for the American trucking industry. Increased consumer spending greatly boosted shipping demand, resulting in driver shortages as trucking companies rushed to fill orders. With new trade deals and industry initiatives to support growth, we predict a successful year ahead for the trucking industry.

Current State of the Trucking Industry

The strong U.S. economy has resulted in a consumer spending boom. This brought about greater demand for trucks to transport consumer goods. The National Retail Federation (NRF) predicts that holiday sales will reach approximately $720.89 billion in 2018, a 4.3-4.8% increase compared with the 2017 holiday season.

However, this increased demand has led to some challenges for the trucking industry. The influx of new orders has strained trucking’s workforce as shipping companies struggle to meet demand. Additionally, the implementation of the electronic logging device (ELD) rule mandated that all trucks should install tracking devices to better account for shipment status. While this has helped create greater transparency and safer working conditions, it also further limited the amount of truckers allowed on the road, as drivers without an ELD cannot commercially drive.

Amazon, FedEx, and other major companies have aimed to combat the driver shortage and maintain efficient operations by hiring thousands of temporary workers for the 2018–2019 holiday season.

On November 30th, representatives from the U.S., Mexico, and Canada officially signed the new United States–Mexico–Canada Agreement (USMCA), replacing the original NAFTA terms. If the new deal is successfully passed through Congress, we expect to see greater wage growth for American truckers.

Yet despite the benefits to continued free trade between the U.S., Mexico, and Canada, Congress may seek to impose caps on cross-border trucking, which may reduce trucking demand. There is also a chance that Congress may require vehicles produced in the U.S. to be composed of at least 75% North American–made parts, driving up costs for new trucks and vehicle maintenance.

The Trucking Industry in 2019 and Beyond

We expect capacity to stay tight with economic growth, with the American Trucking Associations (ATA) estimating that freight volume will increase 2.3% from 2019 to 2024.

ATA Chief Executive Chris Spear aims to address the American trucking industry’s challenges while supporting its continued growth. Spear seeks to make training the younger generation of drivers a top priority moving forward, in hopes of adding numbers to the workforce as demand for truckers continues to grow. The ATA is also researching new methods to increase productivity and implement better safety technology while working to offset tariffs and additional regulations affecting the trucking industry.

The ATA projects that for the next 18 months, the trucking industry will benefit from a strong economic climate. The trucking industry could see an estimated $6.6 billion of new revenue each year if Congress approves the USMCA deal.

The industry experienced the sharpest growth in demand for trucks of the heaviest Class 8 weight segment. The ATA estimates that trucking manufacturers will fill around 305,000 orders for Class 8 trucks in 2019, a 19% increase compared with 2017.

Prep for the Future with Pentaflex!

With continued high demand, we expect 2019 to be a strong year for the trucking industry.

To help in the design of new trucks and maintain the existing fleet, Pentaflex provides a complete range of metal stampings and value-added services, including machining, welding, part washing, and assembly. We also provide components for successful trucking operations, including emissions and axle/brake components.

Our facilities are fully equipped to help your trucking company excel, and our talented staff will continue to deliver high-quality products to our customers.

To learn more about our services and capabilities for the trucking industry, contact us today.

Impacts of the New United States-Mexico-Canada Trade Agreement on Automotive Manufacturers

The North American Free Trade Agreement (NAFTA) between the United States, Mexico, and Canada was officially renegotiated at the end of September, and became what is now the United States-Mexico-Canada Agreement. With the ability for U.S. companies to operate in Canada and Mexico free of tariffs preserved for now, the new agreement updates 24-year-old terms to include a heavy focus on the automotive industry, as well as agriculture, the digital economy, and labor unions.

The updated trade agreement terms have the potential to highly impact the automotive industry. New stipulations require a higher percentage of an automobile’s content to be produced in NAFTA regions and a minimum of $16 per hour paid to workers. The deal’s sunset clause details that the agreement will be in place for 16 years and is to be reviewed every six years.

In this post, we will describe some of the agreement’s terms and what they will mean for automotive manufacturers if the measure receives Congressional approval and goes into effect.

What’s Included in the United States-Mexico-Canada Agreement?

The United States-Mexico-Canada Agreement includes new terms affecting how much of an automobile is to be produced in NAFTA regions. Original NAFTA terms required 62.5 percent of an automobile’s components to be produced in relevant regions for manufacturers to gain the zero-tariff benefit. New terms in the trade deal increase that requirement: 75 percent of an automobile’s composition is to be fabricated in NAFTA regions.

Canada’s participation in this trade deal was in question until September 30th, when the United States’ northern neighbor finally reached an agreement with the terms. There had been threats previously that Canada would be excluded from the new deal, which would have presented a negative impact for automotive manufacturers relying on Canadian-made components and materials.

What the Terms Mean for U.S. Automotive Manufacturers

With new terms requiring 75 percent of an automobile’s contents to be produced in the U.S., Mexico, or Canada, NAFTA regions will receive an influx of manufacturing work for automobile components. This increased production could bring new jobs to the automotive manufacturing industry.

Using local materials, including aluminum and steel, benefits labor unions and protects many high-paying jobs currently located in the U.S. Additionally, the United States would have the ability to impose tariffs if the 75 percent threshold is not reached.

It’s also good for the automotive sector that Canada has maintained its partnership within the agreement. Given that numerous automotive companies in the United States rely on Canadian materials and components for automobile production, higher prices would have been an undesirable consequence as foreign automakers may have benefited from American companies’ decreased competitive advantage.

Stay Tuned

While the terms of the United States-Mexico-Canada Agreement affect businesses in a variety of industries, the automotive sector will experience one of the largest impacts. As the deal moves closer to approval and implementation, Pentaflex is committed to providing the information you need to stay up-to-date.

We consider ourselves a direct stakeholder in this deal due to our close involvement with clients in the automotive supply base— many of those based in Mexico. As a leader in the U.S. metal forming industry, Pentaflex will continue to track trade deal deliberations surrounding the United States-Mexico-Canada Agreement.

To learn more about what the United States-Mexico-Canada Trade Agreement means for your business or to learn about our products and services, contact us today.