How Presidential Elections Impact Freight Demand and Operations
How do presidential elections impact freight demand and operations? 🚚
Election years in the United States bring an extremely heightened sense of anticipation, debate and sometimes uncertainty. And this year, the election has been impossible to escape. Everyone is on the edge of their seats this year, it seems, with the nation’s attention on candidates, policy proposals and the potential changes that could reshape everything. For those in the freight world, an election year carries extreme significance. The freight market, which consists of air, rail, trucking, and maritime services, is heavily influenced by political shifts, regulatory changes, and economic policies.
In this blog, we will explore how an election year affects the freight market, from manufacturing activity to consumer spending and the impacts of new regulations. Preparing for market shifts is crucial for shippers, as the presidential election can have extensive effects, starting right from the beginning of the election build-up right through to post-election months.
1. Election Year Economic Uncertainty and Freight Demand – Pre-Election
As the nation waits anxiously to see who will be crowned the new president. Both businesses and consumers tend to hold off on making major buying and financial investments in these uncertain times until the political landscape becomes much clearer. This cautious approach to spending affects freight demand in a few different ways:
Manufacturing Slowdown – It’s very common to see manufacturers slow down production during election years. Most delay investments into new machinery, equipment and production facilities until they can see which candidates’ policies will triumph. This is because of tax incentives, tariffs and trade agreements shifting significantly dependent on who wins the presidency. Which ultimately influences global supply chains and export activities. What does this mean for the freight market? Well, it’s simple: a slowdown in production results in fewer goods to transport, which might also result in higher freight rates.
Consumer Spending – Any uncertainty in how the future of economic direction results in consumers spending to be kept to a minimum, especially on high-ticket items such as cars, and electronics, etc. As there’s less stock to move, freight demand again suffers, which can be concerning for transportation companies.
One thing to bare in mind is that this dip in demand is usually temporary in the run-up to the election. Once the new president takes to office, the market tends to stabilize, or so we’ve seen in recent years.
2. Ripple Effects After the Ballots are Counted – Post-Election
Once the winner has been named the 47th president of the United States on November 5th, new regulations will come into play very soon after. For people in the world of freight, perhaps the most impactful regulations will be in the form of new environmental standards and labor laws. Here’s a look at areas that we can expect to see changes:
Emissions and Fuel Standards – One of the most closely watched issues for freight businesses is environmental regulations. Some larger political parties generally prioritize stricter emission standards. These restrictions might require the use of electric trucks or trucks powered by alternative fuels to be used more widely. While this push is fantastic for the environment and tackling global warming issues, it also leads to higher operational costs for truckers and fleet operators. Inevitably, these costs are passed down the supply chain to the consumer.
Improved Infrastructure – Although both major political parties advocate for infrastructure improvements, the scope and focus of the investments can vary depending on the outcome of the election. A large-scale investment would be beneficial for logistics companies and shippers alike, as large investments could lead to roads, bridges, railways and ports undergoing heavy improvements. Which would hugely reduce delivery times, reduce congestion, and reduce vehicle maintenance costs.
Labor Regulations – This one affects companies of all shapes and sizes. But labor regulations change depending on which political party is in office. It’s particularly difficult for transportation companies that rely on independent contractors. Higher labor costs result in lower profitability and, therefore, increase freight rates.
3. Trade Policies and Global Freight
New trade agreements and tariffs can either promote or restrict the flow of goods between America and other countries. Which, as you can imagine, has direct impacts on imports, exports and other logistics services.
Tariffs and Trade Wars – Without getting political in this blog, that’s all about politics. We need to shine a light on recent elections that have shown just how quickly trade policies can change. For example, the trade war with China was spurred by tariffs and significantly impacted freight volumes moving across the Pacific. Increased tariffs raise the cost of goods and disrupt supply chains. A candidate with a more protectionist trade policy could reignite trade tensions and reduce freight volumes. At the same time, a candidate advocating for free trade could open up new markets.
Global Supply Chains – How will global supply chains react to policy changes as a result of the election? Well, if any recent elections are to go by, then it’s clear that uncertainty around trade policies can cause companies to diversify their supply chains and move their production out of countries like China and into Southeast Asia or Mexico. This has a huge effect on ports, shipping lanes and cross-border routes, which become either less or more commonly used.
How Can PEI Help?
As the nation eagerly awaits the outcome of the next presidential election on November 5th, the freight and logistics industry has to prepare for change and a potentially turbulent time, for a little while at least. As the incoming administration will undoubtedly change the future of transportation, trade and supply chains.
Although we cannot control how the presidential elections impact freight volumes, we can say PEI has weathered eight presidential elections over our time in business. Which means we know how pre and post-election markets work. It is our ultimate goal to help shippers navigate these changing markets and make the best business decisions possible.
Stayed tuned until next week, when we will discuss how you can prepare your supply chain for market changes in a post-election world.
Need help with any of your specialized shipments during the election period?
At PEI, we’re experts in dealing with specialized freight and can handle yours with any custom requirements.