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Surveys of business uncertainty spiked to record or near-record levels in February, likely related to the uncertainty of administration tariff policy. The National Federation of Independent Business (NFIB) Uncertainty Index rose to its second-highest level ever, behind only last October’s reading, before the presidential election. That has had the effect of dampening the business outlook and turning businesses more cautious about plans to expand, hire or invest in new capital equipment.
Business spending on capital equipment had been slowly improving through the second half of last year, but that is now in question. Hard data on spending showed a marked pickup in orders in January, and shipments in February, but these are likely related to attempts to push forward purchases before the implementation of any new tariffs.
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Labor costs should increase at a slightly slower pace in 2025. Annual wage growth should dip from 4.0% now to about 3.5% by the end of 2025. However, production worker/blue-collar wage growth should stay elevated at 4.0%, as the slowing of immigration reduces labor supply for these jobs. Of course, the construction, agriculture, retail, and leisure and hospitality industries will be most affected by possible labor shortages.
The cost of shipping by truck will rise over the rest of the year, but very slowly. Truckload spot rates excluding fuel surcharges will be 10% higher by the end of 2025, as demand for freight shipping improves, according to Avery Vise of FTRintel. Excess capacity in the truckload market is gradually being squeezed out. Contract rates will follow with a lag, up about 3% at the end of 2025. Less-than-truckload contract rates should also rise only a small amount, given their sustained rise earlier.
The cost of ocean shipping should drop this year to 2023 levels or below. The market should weaken both because tariffs on imports from China figure to reduce demand, and because of excess shipping capacity. While 2024 was highly profitable for the ocean shipping industry, analysts expect losses over the next several years. Only a quarter of current capacity is being used, and new ships being built through 2027 will add even more capacity. Also, the Red Sea closure is absorbing 10% of worldwide capacity to make the longer trip around the southern tip of Africa. Whenever the Red Sea opens again to normal traffic, this extra shipping capacity will no longer be needed.
Prices of materials are mostly rising because of new tariffs, or threats of them. Copper prices have soared 31% and lumber prices, 22% this year on speculation that tariffs may be levied. Steel prices are up 28% this year, anticipating the 25% tariffs which have now been imposed on all steel and aluminum imports.
Other tariffs that have been implemented include an additional 20% on imports from China, bringing the rate to 30%; 25% on imported motor vehicles; 25% on imports from Canada and Mexico that were not covered under the previous USMCA agreement (up for renegotiation in July 2026); and 10% on energy imports from Canada.
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