Montgomery ruling deepens trucking capacity squeeze

The landmark Montgomery v. Caribe Transport II, LLC case has been a pivotal catalyst in accelerating capacity exits and industry consolidation across both trucking and freight brokerage sectors. By sharply increasing broker liability and operational costs, the ruling has effectively raised the competitive bar, forcing many smaller or non-compliant operators out of the market and driving a structural transformation rather than a mere cyclical adjustment. As industry insiders note, this legal precedent has made it significantly harder to operate in previously tolerated 'gray areas,' pushing the market toward fewer, larger, and more compliant players.

Stricter regulatory enforcement on driver qualifications—especially English language proficiency (ELP) and non-domicile CDL requirements—has substantially reduced available trucking capacity. The Trump administration’s revocation of over 28,000 CDLs issued to unauthorized residents and noncitizens, coupled with FMCSA’s crackdown on states like California and Washington for credentialing failures, underscores a nationwide effort to tighten standards. While these measures improve road safety and industry sustainability, they also elevate operational costs and insurance premiums, making scale essential for carriers and brokers to remain competitive.

The regulatory crackdown extends beyond driver qualifications to encompass broader operational compliance, including truck parking, restroom legislation, and aggressive state-level enforcement actions that impose fines, criminal statutes, and asset seizures. This multifaceted enforcement landscape has intensified capacity constraints, driving spot freight rates to near-record highs and prolonging the current freight market cycle. Industry groups such as the American Trucking Associations and OIDA actively support these compliance efforts, recognizing that reduced capacity enhances pricing power for compliant carriers while discouraging market entry by new or marginal operators.

Heightened regulatory scrutiny and enforcement initiatives like Operation Highway Shield have raised barriers for new market entrants and pressured existing carriers to prioritize fleet utilization and profitability over expansion. The combined effect of stricter compliance mandates, liability concerns post-Montgomery, and visa revocations affecting thousands of Mexican drivers has led to a structural shrinkage in qualified truck capacity. This regulatory environment, unlikely to ease due to bipartisan support for enforcement, is reshaping the trucking landscape by limiting capacity growth and encouraging consolidation, with many carriers actively shrinking fleets amid persistent driver shortages.

Since mid-2025, intensified regulatory crackdowns, including the FMCSA's strict enforcement of non-domiciled CDL restrictions and English language proficiency requirements, have dramatically shrunk the available driver pool by as many as 28,000 to 194,000 drivers. This federal push, spearheaded by Transportation Secretary Sean Duffy, has not only revoked thousands of licenses but also exposed significant state-level licensing failures in places like California and Washington, leading to withheld federal funds and heightened compliance standards. While some industry experts like Avery Vise acknowledge these regulatory actions as significant, they argue the driver shortage is a multifaceted issue, with broader scarcity evidenced by companies such as MCK Trucking experiencing dwindling orientation sizes even without hiring non-domiciled drivers.

Structural shifts in the trucking labor market compound regulatory impacts, as federal truckload employment has declined to its lowest since 2014, with a notable 34% increase in independent carriers post-pandemic. This migration toward owner-operators reflects drivers seeking better autonomy amid rising operational costs and regulatory hurdles. Meanwhile, the aging driver demographic and the erosion of immigration as a relief valve—historically critical given that up to 40% of drivers are first-generation immigrants—have tightened capacity further, leaving fleets unable to expand despite rising freight demand and rates. Industry leaders like Josh Phelan of J.B. Hunt and Ryder’s Kendra Phillips highlight how these intertwined factors force carriers to prioritize efficiency over growth, selectively accepting tenders and delaying fleet expansion.

The regulatory tightening cycle, unprecedented since deregulation, has elevated compliance costs and legal liabilities, reshaping recruitment and retention dynamics. High-profile cases such as Montgomery have sharpened industry focus on hiring defensible, qualified drivers, effectively ending the era of unverified or undocumented labor that once masked capacity shortages. This shift, coupled with rising insurance, equipment, and emission-related expenses, has made profitability elusive even amid strong freight demand. As a result, carriers face depleted recruiting departments and must navigate a more complex landscape where brokers tighten carrier qualifications and operational scale becomes critical to absorb escalating costs.

Cross-border trucking between the U.S. and Mexico exemplifies the acute impact of driver shortages and compliance challenges, with stricter enforcement of B-1 visa requirements and English proficiency drastically reducing the pool of qualified Mexican drivers. Uber Freight’s Zeid Houssami notes that despite ample equipment availability—nine trailers per driver—the scarcity of compliant drivers forces carriers to prioritize customers and maximize margins. Mexican carriers are responding by recruiting from southern regions and investing in training academies to meet regulatory standards, but these efforts represent a longer-term and uncertain solution amid a capacity crunch that is driving spot-market rates far above contract levels.

By mid-2026, the U.S. trucking market has experienced a profound supply-driven capacity contraction primarily triggered by intensified regulatory enforcement targeting non-domicile CDLs, multiple MC registrations at single locations, and conditional carriers, as highlighted by the TIA and industry analysts. This crackdown, including landmark legal cases like McGomery and expanded state-level compliance actions, has removed over 200,000 carriers from the market, shrinking available capacity and fundamentally reshaping operational dynamics despite stable or subdued freight demand.

This regulatory-driven capacity squeeze has propelled freight rates sharply upward, with spot rates surging as much as 60% year over year and contract rates rising 13-17%, according to DAT Freight & Analytics and industry leaders like Jason Seidl and Kendra Phillips. Elevated tender rejection rates—reaching nearly 50% above year-ago levels for van freight and 23% for flatbed—reflect carriers’ increased selectivity and routing guide obsolescence, forcing contract rates to play catch-up to the spot market. The result is a freight market where shippers face higher costs and reduced flexibility, even as shipment volumes decline or remain flat.

Operationally, the capacity crunch is exacerbated by a persistent driver shortage intensified by regulatory barriers such as English proficiency requirements and visa cancellations for Mexican B-1 drivers, which have particularly impacted regional markets like the Southwest. Carriers are responding by focusing on fleet utilization and profitability rather than expansion, with Class 8 truck orders rising 36% year over year mainly for replacements. Meanwhile, shippers increasingly rely on large, asset-based carriers with dedicated fleets to mitigate liability risks amid heightened nuclear verdict exposure, signaling a structural shift in freight tendering and capacity allocation.

Despite some emerging clarity around trade policies and modest sector-specific demand growth—such as data center construction and industrial activity—the overall freight market remains supply-constrained with tight capacity expected to persist well into the foreseeable future. Industry experts anticipate a multi-year recovery driven not by demand surges but by ongoing regulatory enforcement and rising operating costs, with no short-term relief in sight. This structural shift marks the most significant capacity-driven freight market transformation since deregulation, fundamentally altering rate dynamics, tender practices, and operational strategies across the U.S. trucking landscape.

Nearshoring trends have significantly amplified U.S.-Mexico cross-border freight volumes, with Mexican exports to the U.S. growing 15–16% year-over-year and surging 34.4% by mid-2026, driven by expanding sectors such as technology, aerospace, and automotive. This sustained demand has intensified capacity bottlenecks at key border crossings like Laredo and Nuevo Laredo, where aging fleets, rising fuel costs, and stricter regulatory enforcement—including Complemento Carta Porte and English proficiency requirements—have compounded delays and pushed freight rates higher, narrowing the gap between contract and spot pricing.

Regulatory pressures, particularly the intensified enforcement of B-1 visa rules and cabotage restrictions, have dramatically shrunk the pool of qualified Mexican cross-border drivers by over 6%, with estimates of 25,000 visa revocations nationwide causing operational uncertainty and capacity shortages. Mexican trucking groups like CANACAR have called for clearer definitions and standardized enforcement from U.S. Customs and Border Protection to mitigate unpredictable visa revocation waves that disrupt freight flows, while carriers respond by prioritizing shippers who simplify compliance amid these challenges.

Despite a seasonal freight slowdown, capacity remains tight not only on U.S.-Mexico lanes but also on U.S.-Canada corridors, with TRAFFIX's NAX Index scores above neutral thresholds reflecting persistent scarcity and elevated costs. This environment, complicated by trade-policy uncertainties around USMCA and tariff exposures, forces shippers to secure early carrier commitments and adopt flexible logistics strategies such as expedited services and intermodal transport to manage costs and meet fixed delivery windows effectively.

Industry leaders like Uber Freight acknowledge that the capacity crunch is fundamentally a driver shortage issue rather than equipment scarcity, with roughly nine trailers available per driver, leading carriers to deploy revenue management tactics that favor high-margin customers. To address this, Mexican carriers are investing in driver recruitment and training academies focused on English proficiency and B-1 visa qualification, though these efforts represent a longer-term solution. Meanwhile, alternative logistics approaches such as transloading are being promoted to alleviate structural constraints and reduce border delays, highlighting the multifaceted response required to navigate this complex cross-border freight landscape.

Surviving carriers are pivoting from growth to efficiency, prioritizing high-margin tenders and leveraging operational scale to withstand compliance costs and volatile freight cycles.

By early 2026, the U.S. trucking market entered a profound multi-year recovery driven predominantly by structural supply-side contractions rather than cyclical demand shifts. Regulatory enforcement actions—especially targeting non-domiciled commercial driver’s licenses and English language proficiency—have removed over 200,000 carriers from the market, creating a capacity shortage that persists despite flat freight demand. This unprecedented 20 to 25% capacity reduction, the most significant since deregulation, has fundamentally reshaped market dynamics, forcing shippers and carriers alike to navigate a tighter, more costly operating environment.

This recovery diverges sharply from traditional demand-driven cycles, as supply constraints—exacerbated by persistent driver shortages and ongoing regulatory crackdowns—continue to limit fleet expansion even amid rising freight demand. Industry leaders like J.B. Hunt’s Josh Phelan emphasize that higher freight rates are essential to sustain reinvestment in a market where driver availability remains the primary bottleneck. Meanwhile, capital expenditures by asset-based carriers focus largely on fleet replacement rather than growth, underscoring the entrenched nature of these supply-side challenges.

Long-term structural shifts are also driving up trucking’s cost base, with operating expenses rising approximately 26% due to increased insurance premiums, equipment costs, and forthcoming stricter emissions standards like the Lonnox rules. These elevated costs, coupled with intensified regulatory compliance demands, are reshaping the industry’s financial landscape and necessitating sustained freight rate increases. Despite these pressures, large shippers and consumers continue to prioritize convenience and rapid delivery, absorbing higher transportation costs without significant pushback, which signals a notable shift in market power dynamics.

Looking ahead, the sustainability of this market cycle remains debated. Analysts like Thom Albrecht suggest that absent further regulatory reforms, the current tight capacity and elevated cost environment could persist through early 2028 or beyond, prolonging the bull market in trucking rates. While some industry voices anticipate potential government relief to ease capacity constraints, prevailing enforcement trends and immigration challenges suggest that regulatory-driven supply contraction will continue to dominate, reinforcing a structurally higher cost and tighter capacity trucking market for years to come.