Page 6 - Market Outlook Q3 2025

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North American Trailer

Economic Overview

Figure 6 once again became an issue, because of tariffs. We are watching history
repeat itself as of September this year. The Fed lowered its benchmark
rate at its September meeting, but as was the case last year, inflation is
rising again. Last year, inflation stopped trending down because of a
surge in consumer demand due to the expectation that tariffs would
cause price increases. This year, inflation has been trending up because
last year’s expectations were correct.
Figure 9

Metal Prices, Freight Prices and Interest Rates

The price of rods/bars/shapes and secondary aluminum products
(ingot/billet made from recycled aluminum) have clearly trended up
since tariffs were implemented earlier this year. The price of scrap has
been going up since 2024 after new technology was introduced that
made it less costly to use relative to ore. The impact of the increase in
demand cannot be separated from the impact of tariffs. However, tariff
increases have clearly had an impact on aluminum product markets.
Figure 7

Figure 10
In the steel industry, tariffs have just as clearly led to price increases, but
as was true in the aluminum industry, other factors were also impactful. It should be noted that the inverted prime rate of interest shown in
The impact of tariffs is easy to discern in the market for rods/bars/ Figure 10 has predicted every turn in the trailer production cycle going
shapes. In the cold-rolled sheet/strip market, though, a massive spike back to the 1970s. It is currently predicting that trailer production will
began in 2021. The price more than tripled in less than a year and was increase going forward. What needs to be made clear, though, is that the
still double what it was before the spike as of the first quarter of 2024 bounce back from a lengthy, steep decline will likely not be reflective
before finally falling to an index level of about 300, which was still 50% of the historically normal steep increase. Trade and immigration policy
higher than the pre-pandemic level of 200. It bounced back up to 400 uncertainty is making it difficult to make capital expenditure decisions.
shortly after new tariffs were announced and tapered off as it became In addition, the length of the freight industry’s slowdown has left fleets
clear that steel from Canada and Mexico would not be subject to tariffs. with trailers that are older than they would like but are well below
the mileage typically associated with that age. The result is that the
Figure 8 climb back from a historically low cyclical trough will likely take longer
than the historical norm. Current expectations call for trailer orders,
The prices of truckload and less-than-truckload freight are both highly
correlated with the price of trailers, as can be seen in Figure 9. Less-than- production and shipments to grow slowly through 2026, and a return
truckload pricing responded quickly to new tariff announcements. It to positive year-to-year growth around the end of 2026 or first-quarter
took a while, but truckload freight and trailer prices are also going up at of 2027.
this point. As has been the case historically, it will probably take a few Trailer Industry End Use Markets
months for long-run stable prices to be reached.
The Bureau of Transportation Statistics (BTS) Truck Freight Tonnage
Insert figure 9 Index, which is based primarily on the ATA’s freight tonnage index, has
closely tracked the trailer production index for decades. In Figure 11,
The price of money (interest rates) started decreasing in September
2024, but quickly stabilized in the first quarter of 2025, as inflation the two series are compared in real time. What you see in the graph are
the actual monthly indexes. The linear regression lines show that they
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