Trucking Bankruptcies Spike as Tariffs Quash Post-Pandemic Boom

Trucking and freight businesses that once thrived on the pandemic e-commerce boom and high spot prices are increasingly seeking bankruptcy protection, with more stress looming as the Trump administration’s tariffs derail business plans.

The post-pandemic demand surge prompted an influx of new companies into the industry. Now, many are struggling with low freight rates, excess capacity, thin margins, and reliance on short-term, sales-tied financing.

Of more than 370 companies in the transportation and logistics industry that filed for bankruptcy over the past five years, about 41% did so in the past two years. Many were trucking and freight businesses with up to $10 million in liabilities, according to filings provided by BankruptcyData.

While smaller companies are filing for bankruptcy at a faster pace, large ones are going under, too. Yellow Corp., which defaulted two years ago, is liquidating after firing 30,000 employees—one of the largest mass layoffs in recent history.

Freight service providers were caught in the “boom-and-bust cycle,” said Michael H. Belzer, professor of transportation economics and labor relations at Wayne State University. The industry had been experiencing a “hangover” from the boom when “man-made swings” from President Donald Trump’s tariffs added further volatility, he said.

“The canary in this coal mine is trucking, which runs on the narrowest margins and is notoriously structured to cannibalize itself to survive, until it fails,” Belzer said.

After the boom, companies overinvested in trucks and drivers based on a temporary spike in demand, said Daniel Alpert, executive chairman at Westwood Capital and macroeconomics professor at Cornell Law School.

The result is that “a business is overindebted, having difficulty paying its creditors, trying to make a marginal profit on the next order, and finding it difficult to do so,” Alpert said. “Having a very expensive truck inventory costs a lot of money to keep up with.”

While there’s no evidence of current driver shortages, companies report difficulty finding workers, according to transportation economist Noel Perry. The Trump administration’s immigration crackdown could impact drivers, he noted.

“If Trump’s program to disqualify these people and deport them is successful, there will be a shortage of drivers,” Perry said. “It would tend to be more towards the borders, but there would be a shortage.”

Trump also signed a March executive order making English proficiency a “non-negotiable safety requirement” for drivers. About 24% of truck drivers are Latino, according to the US Bureau of Labor Statistics.

Tariffs Hit Transportation

Tariffs affect the trucking industry mainly by creating uncertainty that discourages companies from investing in new equipment or expansion, said Jason Miller, professor of supply chain management at Michigan State University.

For the industry to recover, tariffs would need to be rolled back, companies would need confidence to invest and stimulate demand for machinery, and housing production—which depends heavily on trucking for materials and equipment—would need to pick up, he said.

“At this point for the trucking sector, I’ve completely ruled out a market recovery in 2025,” Miller said. “In an optimistic scenario, the earliest meaningful recovery could take place in the second quarter of 2026, so we’ve kicked the can down the road by roughly another nine months.”

Joseph Pack, a bankruptcy attorney at Pack Law PA, said rising insurance costs, inflation, and higher financing expenses compounded the trucking market’s problems. He represented Star Transportation when it filed for bankruptcy last year.

“The bankruptcy filing kept the company alive for several months, giving it a chance to see if spot rates would rebound,” Pack said. “Had they done so, even just a little, the company was positioned to thrive.”

Heavy Debt

Justin M. Luna, an attorney who has represented small transportation companies, said “merchant cash advances” are a recurring issue.

Through the advances—intended as a short-term financing option—a business receives a lump sum upfront in exchange for a percentage of its future revenue or sales proceeds.

“Some of the businesses don’t have the ability to take out traditional loans with big financial institutions because their work is so fluid, and they are faced with an immediate cash crunch,” Luna, of Latham Luna, said. “This is when they turn to these merchant cash advance companies, which have been a real issue for companies, and not only in the trucking industry.”

Luna said small trucking businesses often use Subchapter V of Chapter 11 bankruptcy to cut down claims and liens, protect the lender, and reduce debt payments overall.

Louis Caditz-Peck, executive director at the Responsible Business Lending Coalition, said the volume of merchant cash advance financing had already grown in 2019 to more than six times the volume of lending from the Small Business Administration in amounts below $250,000.

He said these lenders usually don’t disclose the true cost of financing to small businesses.

Such lenders are excluded from traditional transparency standards for business borrowing. “The Truth in Lending Act’s price transparency requirements don’t cover small business financing,” Caditz-Peck said. “That’s one reason these companies can charge APRs of 50% to 300%.”

‘Covid Kids’

Even though the freight market started slowing in late 2022, that year was still the most profitable on record for the industry, Miller said.

Yet many trucking companies failed during what should have been the best market ever, especially those founded in the first year of the pandemic—which he calls the “Covid kids.”

Many of those newcomers overpaid for equipment and weren’t prepared for the downturn, leading to unusually high failure rates even in strong market conditions.

On top of economic challenges, pockets of the industry now face added competition from Uber Freight—where, instead of a cab, a business can book an 18-wheeler with a 53-foot trailer, Pack said.

“Uber can haul a load from Jacksonville, Florida, to Los Angeles for potentially several hundred dollars less than a traditional carrier with 500 trucks because of the overhead costs that come with running the larger business,” Pack added.