Trucking and freight companies that benefitted during the pandemic’s e-commerce surge and high spot prices are now increasingly filing for bankruptcy as stress mounts from tariffs introduced during the Trump administration, complicating business operations.
The surge in post-pandemic demand attracted a flood of new entrants to the industry, but many are now grappling with low freight rates, excess capacity, narrow profit margins, and a dependency on short-term financing linked to sales.
Out of over 370 companies in transportation and logistics that sought bankruptcy protection in the last five years, nearly 41% did so in the last two years. Many of these were trucking and freight businesses facing liabilities up to $10 million, according to filings from BankruptcyData.
While smaller firms are filing for bankruptcy at an accelerating rate, larger companies are also facing challenges. Yellow Corp., for example, is in the process of liquidation following a default two years ago, resulting in one of the largest layoffs in recent memory with 30,000 employees let go.
Michael H. Belzer, a transportation economics professor at Wayne State University, noted that freight service providers are experiencing a “boom-and-bust cycle.” The early boom has been followed by a downturn, exacerbated by “man-made swings” from tariffs implemented during Trump’s presidency.
Experts like Daniel Alpert, executive chairman at Westwood Capital, pointed out that many companies overexpanded in response to a temporary demand spike, leading to debt burdens that hinder their ability to repay creditors. “Keeping an expensive truck inventory is financially demanding,” Alpert stated.
Despite there being no current evidence of driver shortages, companies are facing recruitment challenges, partly due to the Trump administration’s immigration policies, according to transportation economist Noel Perry. He warned that the potential disqualification and deportation of drivers could lead to a shortage, particularly near borders.
Tariffs Impacting the Transportation Sector
Jason Miller, a supply chain management professor at Michigan State University, explained that tariffs introduce uncertainty, discouraging investments in new equipment and expansion. For a recovery in the trucking sector, a rollback of tariffs would be essential to encourage confidence and stimulate demand, particularly in industries reliant on trucking.
Debt Concerns
Justin M. Luna, an attorney with experience representing smaller transportation companies, highlighted the risks of “merchant cash advances,” which provide immediate cash in exchange for a share of future revenue. Many trucking companies facing cash crunches resort to these non-traditional loans, which often come with exorbitant fees.
‘Covid Kids’ Struggling
Although 2022 was the industry’s most profitable year, many companies, especially those established during the pandemic—coined the “Covid kids”—failed due to overpayments for equipment and unpreparedness for the downturn.
Furthermore, challenges are compounded by competition from newer entities like Uber Freight, which can operate at lower costs than traditional carriers with significant overhead expenses.
