What Is the Impact of Tariffs on Cost-Per-Mile in Trucking?

Freight companies understand the value of Key Performance Indicators (KPI) like cost-per-mile that measure operational costs. With increases to trade tariffs, trucking and freight companies want to know how tariffs will impact key metrics like cost-per-mile. Freight companies that are asking — what is the impact of tariffs on cost-per-mile in trucking — may find the answer in this breakdown that highlights the impact of trade tariffs.

How Will Tariffs Impact Cost-Per-Mile Metrics?

Tariffs are expected to increase the operational costs for trucking and freight companies — which directly translates to an increase in cost-per-mile.

When the price of imported goods, raw materials, or essential equipment components increases due to tariffs, these increases are absorbed at different points along the supply chain, and in many cases lead to increased expenses for freight carriers. For example — trade tariffs on steel and aluminum are estimated to add thousands of dollars to the cost of a new truck or trailer. 

Reports have indicated that additional tariffs could increase the cost of trucking operations in several key areas that contribute directly to cost-per-mile metrics. These include maintenance and repair costs, new equipment costs, fuel costs affected indirectly by economic effects, and even reduced freight volume, which can lead to higher fixed costs per mile.

Here are some key cost areas within the trucking and freight industry that are susceptible to the influence of tariffs:

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1. Maintenance and Repair Costs

Tariffs on raw materials like steel and aluminum, as well as on vehicle components like tires, electronics, and engine parts — particularly from countries like Mexico — will directly increase the cost of replacement parts. This means that routine maintenance and unexpected repairs become more expensive for trucking companies, contributing to higher maintenance and repair costs and an increase in overall cost-per-mile. For example — if tariffs lead to a 10% - 25% cost increase to imported parts, this will inflate annual maintenance budgets and repair expenses.

2. Equipment Costs

The acquisition costs of new trucks and trailers is a major factor in overall operating expenses for many freight companies. Tariffs on imported steel, aluminum, and other raw materials used in the manufacturing of trucks and trailers, or trade tariffs on fully-assembled vehicles or major engine components lead to higher prices for new equipment. These increased capital expenses translate directly to higher fixed costs per mile over the lifespan of a vehicle.

3. Fuel Costs

While fuel prices are primarily influenced by global markets — tariffs can have indirect effects on fuel costs that impact cost-per-mile. Trade disputes and agreements initiated by tariffs can impact global economic growth, the energy demand, and the stability of fuel prices. In addition — tariffs may be applied directly to energy-based imports or the equipment needed for domestic energy production. This may lead to higher or more unpredictable fuel prices, which are a primary factor in a fleet's cost-per-mile calculations.

4. Reduced Freight Volume

Tariffs increase the cost of imported goods for businesses and consumers — which can lead to reduced demand for those products and a decrease in overall import and export activity. If freight volume decreases, trucking companies may find themselves with unused assets, less-lucrative contracts, less cargo to transport, and fewer miles that will increase the cost-per-mile. With an expected increase in equipment and repair costs, this reduced freight volume will have a significant impact on calculated cost-per-mile metrics. 

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READ MORE: What Is the Average Cost-Per-Mile in the Trucking Industry?

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The impact of tariffs on cost-per-mile in trucking is multifaceted and influences both direct expenses like equipment and indirect factors like fuel costs and freight demand. Navigating this complex economy requires trucking companies to stay informed, better manage their costs, optimize operations for efficiency, and be proactive in their planning.

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