Logistics outlook 2026: How a capacity shakeout could rebalance freight

The U.S. transportation and logistics sector is experiencing a freight recession driven by excess truckload capacity, depressed rates and rising costs. As market pressures mount, we anticipate an uptick in carrier bankruptcies and exits, especially among smaller fleets, with meaningful effects on middle market transportation and logistics companies as well as shippers as trucks exit the market and capacity tightens.

Recent regulatory changes under the administration, particularly those targeting nondomiciled commercial driver’s license (CDL) holders and the English language proficiency (ELP) requirement, are expected to accelerate this shakeout. In 2026, these forces could begin to rebalance supply and demand, paving the way for higher freight rates and a more stable market environment. Transportation and logistics providers, as well as companies reliant on freight shipping, should prepare to adapt to these evolving conditions.

Excess truckload capacity is at the root of the current freight slowdown, with too many trucks chasing too little cargo. Despite flat freight volumes in recent years, new interstate motor carriers (which transport goods across state lines or between the U.S. and another country) have increased significantly due to shifting labor dynamics, loose regulations and low barriers to entry for truck drivers.

With more than 90% of motor carriers running fleets of fewer than 10 trucks, the surge of small operators has reshaped the competitive landscape. In an environment of lower demand and rising costs, pricing often takes precedence over quality and service—a dynamic that generally benefits smaller carriers due to their lower cost structure.

Adding to the glut of available trucks, freight demand and shipments have remained sluggish. Freight expenditures have increased 12% since the beginning of 2019 while shipments have decreased 10%, according to the Cass Freight Index, which measures aggregate freight spending and shipments. Additionally, the Bureau of Transportation Statistics’ freight transportation services index, which captures freight volumes, has increased only 1% over the same period. This means fewer shipments are needed to move the same amount of goods, thanks to greater efficiency and consolidation of shipments. Yet despite this softer demand, the number of registered interstate motor carriers has surged by 31% since 2019, according to the Federal Motor Carrier Safety Administration (FMCSA), further intensifying competition in an already crowded market.

With truckload operating ratios recently reaching multidecade highs—indicating dwindling profits—we expect the challenging freight environment combined with recent regulatory actions to result in a reduction in capacity during 2026.

English language proficiency order

Alongside market capacity factors, the administration’s increased scrutiny of the ELP requirement and nondomiciled CDL holders is having a ripple effect throughout the transportation and logistics sector. According to FreightWaves, approximately 10% of commercial drivers may lack sufficient proficiency under the recently issued ELP order, which requires drivers to demonstrate English proficiency or be placed out of service. Strict enforcement of the ELP mandate could remove around 25,000 drivers from the road in the first year, according to Freight Transportation Research. Additionally, as a result of the administration’s new rule restricting the issuance of nondomiciled CDLs (generally issued to non-U.S. citizens), the FMCSA estimates 194,000 current nondomiciled CDL holders will exit the freight market over the next two years, which represents approximately 5% of commercial drivers in the United States in 2024.

Some carriers that have recently attempted to limit the use of drivers holding nondomiciled CDLs—to more quickly align with federal guidelines—have experienced significant service disruptions and delays, highlighting the impact these drivers have on the freight market. A Transport Futures report recently published by J.B. Hunt indicates the total population of at-risk drivers potentially affected by ELP enforcement, nondomiciled CDL restrictions, and other immigration-related enforcement measures could surpass 600,000.

What should transportation and logistics companies do next?

Looking ahead to 2026, shippers should prioritize securing long-term contracts earlier in the bid cycle to lock in capacity and mitigate the growing risk of rising rates and service disruptions. Enhanced due diligence in vetting carriers—especially around regulatory compliance and driver qualifications—will be essential to ensure reliability and minimize risk. For carriers, a decline in capacity presents an opportunity to strengthen operational efficiency and invest in compliance processes. This will help companies position themselves to capture increased pricing power as capacity tightens. Updating rate and demand forecasts amid evolving market and labor dynamics will be critical to properly pricing contracts ahead of bid season. 

Brokers, meanwhile, will need to navigate a shrinking carrier pool by deepening relationships with compliant fleets and leveraging technology to optimize load matching and risk management. Examples of that use of technology might include:

• Carrier vetting platforms that integrate FMCSA data to flag compliance and fraud risks
• AI-powered load matching to improve efficiency, reduce fraud and enhance carrier relationships
• Predictive analytics for rate forecasting and capacity planning

Brokers and carriers alike will need to stay abreast of heightened legal exposure as insurance companies adopt stricter underwriting standards in response to the changing regulatory environment. Across the board, strategic partnerships and proactive planning will be key to thriving in a rebalanced freight market.