It's the economy, stupid!
It's the economy, stupid!
In the 1992 US presidential election, Bill Clinton’s political strategist, James Carville, famously wrote, 'It’s the economy, stupid!' on a whiteboard during a meeting. This was to remind Clinton’s campaign staff to stay focused on the primary concern of Americans at the time: the struggling economy.
ALL RESPONDENTS
What are the biggest trends that will shape the transportation industry in 2025?
Similarly, our survey respondents believe it’s the economy that will shape the transportation industry the most in 2025, followed by 'Geopolitical events', 'Environmental regulations' and 'Artificial Intelligence'.
Unfortunately, despite the overall optimism expressed by our survey respondents about the transportation market next year, the economic outlook for 2025 is a bit dull, especially for the leading economies in Europe.
Simply put, the transportation market will follow the economy's lead in 2025.
First, some good news, as Pierre-Olivier Gourinchas writes in an International Monetary Fund (IMF) blog post published on 22 October 2024: 'It looks like the global battle against inflation has largely been won, even if price pressures persist in some countries…In most countries, inflation is now hovering close to central bank targets, paving the way for monetary easing across major central banks.'
REAL GDP GROWTH
World Economic Outlook Projections
Annual percentage change
The outlook for GDP growth, however, is less exciting, with the United States continuing to outpace most of Europe.
In its October World Economic Outlook, the IMF is forecasting GDP growth of 2.2% for the United States in 2025, up 0.3% from its previous predictions. This is slower growth, however, than the expected 2.8% growth in 2024. But it’s also much higher than the forecasted GDP growth for Germany (0.8%), France (1.1%), Italy (0.8%) and the United Kingdom (1.5%). The only bright spot among the leading EU economies is Spain, which is expected to post 2.9% GDP growth this year and 2.1% in 2025.
Growth outlook remains uncertain for European countries
In a euronews article published on 22 October 2024, Piero Cingari highlights the following insights from the IMF report:
'Persistent weakness in manufacturing is weighing heavily on growth for countries such as Germany and Italy,' the IMF stated, pointing to ongoing strains in industrial output and real estate.
While Italy is expected to benefit from the EU-financed National Recovery and Resilience Plan, Germany faces the combined pressures of fiscal consolidation and a sharp decline in property prices, both of which are expected to dampen its economic performance.
In contrast, emerging countries in Europe, such as Turkey, Hungary, Poland and Romania, are collectively expected to grow at a faster rate than Western European countries (3.2% in 2024 and 2.2% in 2025).
'We can see the centre of gravity and the power of the logistics industry in Europe shifting from Benelux, Western Germany, Eastern France, Italy, and parts of the UK to Central and Eastern Europe (Poland, Czech Republic, Slovakia, Hungary, Romania, all the way down through the Balkans, around to Turkey and to Central Asia.”
Piotr Iwo Chmielewski, Chairman of the Board at Rohlig Suus
Shippers are concerned about geopolitical events, while carriers/3PLs are bullish on AI and transportation platforms
SHIPPERS VS. CARRIERS
What are the biggest trends that will shape the transportation industry in 2025?
While a large percentage of both shippers and carriers/3PLs view 'Economic conditions' as a leading factor in shaping the transportation industry in 2025, it actually ranked second for shippers behind 'Geopolitical events'.
'My largest concerns are geopolitical in nature', commented a supply chain executive from the United States via the survey.
'The US presidential election [won by Donald Trump, Ed.] can have profound impacts on both domestic and international supply chains.'
By February 2025, the Russia-Ukraine war will reach its third year, with no resolution in sight. The conflict continues to inflict severe hardship on the people of Ukraine and creates ongoing risk and uncertainty for supply chains across Europe.
The growing conflict in the Middle East, including the disruption caused by the terrorist attacks in the Red Sea, adds to this uncertainty. This is forcing ocean shipments from Asia to Europe to travel around South Africa via the Cape of Good Hope instead of using the Suez Canal, a reroute that increases transit time by 10–14 days. When you consider all this, plus the ever-present danger of China starting a conflict with Taiwan, you can understand why geopolitical events are top of mind for shippers.
Another issue that will continue to impact supply chains in 2025 is the tariff war between the United States, the EU, China and other countries.
Back in 2018/19, for example, the United States levied the Section 301 tariffs on China imports.
Most of those tariffs remain in place today, and in May 2024, the Biden administration raised tariffs on $18 billion of Chinese goods, including semiconductors and electric vehicles.
With the election of Donald Trump as US president, who plans to levy a blanket tariff of 10% to 20% on all imports (and an additional 60% to 100% tariff on goods from China), it's clear that tariffs will continue to play a key role in US trade policy over the next few years.
Meanwhile, the EU is pushing ahead to implement a 45% tariff on Chinese electric vehicles too. In short, the risk for a global trade war, with tit-for-tat tariffs, is growing as we head into 2025, which is why this topic ranks relatively high for shippers too.
On the carrier/3PL side, they were significantly more bullish on the impact Artificial Intelligence and transportation networks/platforms will have on the industry compared to shippers. Additional research is required to better understand why, but one possible explanation ties back to their focus on market expansion in the coming year.
In the 2021 Pulse Report, we discussed how matching real-time freight demand with capacity in a faster, smarter, and more automated way is a great example of the power of the network.
Technological advancements in the years since, driven by AI, machine learning and behavioural science, is making it easier for shippers to find new carrier partners and secure capacity from them, and it’s making it easier for carriers — especially small and mid-sized ones — to grow their business with shippers they previously didn’t have visibility or access to.
Transporeon’s Freight Marketplace, Autonomous Quotation and Autonomous Procurement solutions are good examples.
"As a global organisation, we continue to digitalise our operations. As you can imagine, it's been a multi-phase project or journey that required a lot of clear vision, collaboration and strong leadership. What I would advise to other carriers that are on this journey is to embrace change and technology, and to set the standard."
Robert Newman, Regional Lead Logistics Growth Manager at Maersk
Notable differences between US and European respondents
NORTH AMERICA VS. EUROPE
What are the biggest trends that will shape the transportation industry in 2025?
There were also some notable differences between US and European respondents. Geopolitical events and environmental regulations ranked higher for the European respondents, which is not surprising considering the factors discussed earlier, e.g. the Russia-Ukraine war, Fit for 55 package, revised CO2 emissions standards.
Geopolitics and the environment concern Europeans; cybersecurity and tariffs top US priorities
For the US respondents, cybersecurity threats and trade policies/tariffs ranked higher, the latter likely because of the threat of increased tariffs, all the more possible following the re-election of Donald Trump as president.
Economic conditions will play a key role in the transportation market in 2025
This is especially true in Europe where GDP growth rates are expected to lag behind those of the US. This trend, combined with weaker manufacturing outputs in countries like Germany, signals potential headwinds in the logistics industry. In addition, geopolitical concerns also rank highly, especially among shippers, with ongoing risks like the Russia-Ukraine war, an escalation of fighting in the Middle East and US-China tariff tensions. These factors highlight the complexities facing global supply chains, which could lead to trade disruptions in the year ahead.
Finally, on the technology front, carriers and 3PLs seem to be bullish on AI and digital transportation platforms as a way to enhance market expansion and seamlessly connect with more shippers.
© 2024 Trimble Inc.