The reelection of President Donald Trump, the outcome of the congressional elections, and state government changes will have numerous implications for transportation and supply chain stakeholders. Our policy and regulatory expectations will provide a guide as we head into the January inauguration and beyond.

Election Outcomes

Energy

President Trump and a Republican Congress are likely to return to office as energy prices decline. Throughout 2024, energy prices in many markets have dropped to levels last seen in late 2021. This included low-sulfur distillates –like diesel – used across modes of heavy-duty freight transport. This trend is driven by weak international energy demand growth and abundant production, despite elevated geopolitical risk from Middle East conflict and the Russia-Ukraine War.

The Trump Administration and Republican Congress will be strong proponents of domestic fossil fuel production. The President has vowed to remove major roadblocks to advance production nationwide, particularly on the Gulf Coast and in the Arctic. With increased support for the conventional energy industry, will we see a significant drop in crude oil and diesel prices? As the world’s largest oil producer, the U.S. energy industry’s response to shifts in oil prices is crucial. At what price point will U.S. firms expand production and lower prices for consumers?

The chart below draws attention to the oil price required for producers to profitably drill a new well. Oil prices falling below $65 per barrel will discourage production growth in several key geographies, including the Permian Basin of West Texas and Southeast New Mexico, which accounts for about 45% of total U.S. crude oil production.

Although oil prices could temporarily fall to $40-$50 per barrel, sustaining these low levels long term is unlikely. U.S. energy producers need higher prices for profitability, and prolonged low prices would discourage drilling new wells, eventually reducing U.S. production.

Another important consideration for managing international energy prices and costs is fluctuation in the value of the U.S. dollar relative to other currencies. The dollar has an inverse relationship with oil prices. A weaker dollar makes the cost of dollar-denominated commodities, like crude oil and refined products such as diesel, relatively less expensive for other currencies, increasing demand and prices. A stronger dollar tends to weigh on prices because energy becomes relatively more expensive for other currencies.

Trucking & Infrastructure

The trucking industry has responded positively to Trump’s reelection, expecting his policies, and those of a Republican Congress, to be a boon for corporations and, in turn, trucking. The industry recalls the impact tax cuts had on the freight market during 2017-2018 and hopes for similar benefits with renewed tax cuts under a Trump administration. . Additionally, the industry is encouraged by President Trump’s focus on deregulation, particularly moving away from prioritizing zero-emission vehicles, especially heavy-duty battery electric vehicles, which the industry argues are currently impractical due to cost, infrastructure, and maintenance challenges.

A key difference between the second Trump Administration and the Biden Administration will be the shift in federal support from zero-emission vehicles and renewable energy to internal combustion vehicles and the oil and gas industries. Environmental Protection Agency (EPA) regulations, like Phase 3 Emissions Standards and California’s vehicle emissions standard waivers, along with incentives for purchasing zero-emission vehicles may be reduced or eliminated. However, OEMs have already invested significantly in engines meeting 2027 standards, which are expected to enter the market at a higher cost than previous models.

President Biden’s hallmark infrastructure and clean energy legislation, the Bipartisan Infrastructure Law (BIL) and Inflation Reduction Act (IRA), may face reductions or eliminations of select grants (BIL) and tax credits (IRA) by Congress and Trump. However, they must tread carefully, as much of the BIL and IRA funding is heading into staunchly conservative constituencies.

Trade

President Trump has proposed blanket import tariffs as a possible replacement for other forms of taxes. Import tariffs have an inflationary effect and have the potential to antagonize longstanding trading partners and escalate tensions with China. The retaliatory nature of enacting tariffs resulted in a trade war with China during the first Trump Administration, beginning in 2018. Similar consequences can be expected should a second trade war intensify in 2025. Long term, this may reduce freight flows due decreased consumer demand from higher prices.

Imports of animal fats, vegetable oils, and soybeans, along with support of low carbon fuel standards (LCFS) and renewable fuel standards (RFS) have driven the surge in renewable diesel supply in the U.S. in recent years.

Renewable diesel production has grown rapidly, with producers and distributors seeking to expand sales beyond California. However, tariffs could raise the cost of imported feedstocks, making renewable diesel more expensive than conventional diesel. Like most policy analyses, this remains speculative.

The possibility of a second strike by the International Longshoremen’s Association (ILA) poses a significant threat to the international movement of goods. The labor agreement between the ILA and the United States Maritime Alliance expires on January 15, near the transition of the U.S. government, which could complicate reaching a new agreement.

It can take several months for overseas purchase orders to reach U.S. ports. According to the Journal of Commerce, anticipated port strikes on the East and Gulf coasts in January, along with proposed tariffs by President-elect Trump, are expected to accelerate the arrival of hundreds of thousands of containers in November and December.

State Referendums, Election Reactions

Washington State

Amidst the fervor surrounding the presidential and congressional elections, Washington State voters elected to preserve the state’s cap-and-trade program. This approval, along with efforts to connect Washington State’s cap-and-trade program with those of California and Quebec, means the program’s impact on diesel prices will remain (see Figure 1), but could decrease if these programs officially connect.

California

As with the first Trump presidency, California’s robust clean energy and climate policies are likely to clash with federal agendas. Key measures like the Advanced Clean Trucks, Advanced Clean Fleets, and In-Use Locomotive regulations rely on EPA waivers, which may be at risk under a second Trump presidency due to a Republican push for deregulation. This could undermine California’s regulations. In response, Governor Gavin Newsom has called an emergency legislative session to discuss and protect California’s priorities.

Advanced Clean Trucks (ACT)

ACT mandates that by 2035, 75% of all heavy-duty truck sales (Class 4–8) and 40% of Class 7–8 tractor sales in California be zero emissions. States that have adopted this rule include Washington State, Oregon, Colorado, New Mexico, New York, New Jersey, Vermont, and Massachusetts. States considering adoption include North Carolina, Virginia, Maryland, Pennsylvania, Connecticut, Rhode Island, Illinois, and Maine.

ACT may be more resilient to federal intervention because of the Clean Truck Partnership, an agreement between California regulators and major truck manufacturers to moderate some regulations in exchange for manufacturers meeting the ACT requirements regardless of litigation.

Advanced Clean Fleets (ACF)

ACF requires large carriers to start transitioning their drayage trucks to zero emission vehicles (ZEVs) in 2024, aiming for full implementation by 2035. The timeline extends to 2039 for work trucks and day cab tractors, and 2042 for sleeper cab tractors and specialty vehicles if the final purchaser is in California. Additionally, the rule plans to end diesel truck sales by 2036 to encourage the adoption of ZEV medium- and heavy-duty vehicles. Unlike ACT, ACF has not been adopted by other states, is still awaiting an EPA waiver, and is facing significant legal challenges.

In-Use Locomotives

The In-Use Locomotives regulations require the use of the cleanest diesel models available. By 2030, locomotives may not be more than 23 years old. By 2035, all locomotives in use must be zero-emission models. Similar to the ACF, the In-Use Locomotives rule is being heavily litigated.

Key Takeaways

The re-election of President Donald Trump and a Republican Congress introduces key shifts for transportation and supply chain stakeholders. Federal support is expected to pivot toward fossil fuel production, with policies likely reducing emphasis on clean energy and zero-emission technologies. However, it is uncertain if market dynamics will boost production and lower fuel prices. While tax cuts and deregulation could benefit corporations, tariffs and trade tensions could disrupt supply chains and elevate costs for imported goods. State initiatives, such as California’s zero-emission vehicle regulations, may face federal challenges but could persist through key partnerships. Additionally, potential labor disputes at major U.S. ports highlight the urgency for resolutions to prevent further supply chain disruptions. As the January inauguration nears, industry stakeholders must navigate a complex policy environment where federal and state agendas may diverge, impacting the cost, movement, and sustainability of goods in the U.S.

Stay Tuned

Breakthrough’s Research & Economics Team will discuss their expectations further in our upcoming Advisor Webinar on November 21 at 2 p.m. CT.

Breakthrough will be actively monitoring additional developments as they arise. Please reach out to your Client Account Manager with any additional questions.

Andy Martinelli

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