Adam Taggart | Thoughtful Money®
Miracle Turnaround? The US Industrial Economy Is Now Booming DESPITE High Oil Prices | Craig Fuller
Most Important Insight
The US industrial economy has structurally decoupled from its historical sensitivity to high oil prices due to a massive shift toward domestic reshoring and regional nearshoring in Mexico.
Most Original Insight
High oil prices are paradoxically acting as a catalyst for US industrial growth by making long-distance trans-Pacific shipping economically unviable compared to regional trucking and rail.
Key Points
- Freight volumes in the US have reached multi-year highs in early 2026, signaling the definitive end of the 'freight recession' that began in 2023.
- Mexico has officially solidified its position as the primary trading partner for the United States, surpassing China in total trade value for the first time.
- Industrial electricity demand is experiencing a structural surge driven by the proliferation of domestic manufacturing plants and data centers.
- The 'construction supercycle' in US manufacturing facilities is translating into actual production output as plants commissioned in 2023-2024 come online.
- Automation and AI integration are successfully offsetting higher US labor costs, maintaining the competitiveness of domestic production against low-cost overseas labor.
- Freight capacity is tightening rapidly, which is expected to drive significant upward pressure on contract trucking rates through the remainder of 2026.
- The B2B industrial economy is showing a sharp divergence from the consumer economy, which remains pressured by persistent inflation and high interest rates.
- Supply chain resilience has replaced 'just-in-time' efficiency as the primary driver of corporate capital expenditure in the industrial sector.
Investment Implications
| Asset / Sector / Instrument | Action | Source | Notes |
|---|---|---|---|
| US Trucking Carriers | BUY | explicit | Fuller explicitly notes that capacity is tightening and the freight recession has ended, leading to higher rate realizations. |
| Mexican Logistics Infrastructure | BUY | implicit | Mexico's status as the top US trading partner creates a massive tailwind for cross-border rail and warehouse assets. |
| Industrial Utilities | BUY | implicit | The surge in industrial electricity demand from new domestic factories provides a guaranteed long-term revenue floor. |
| US Industrial REITs | BUY | implicit | Increased domestic manufacturing requires significant expansion of specialized industrial and warehousing space near regional hubs. |
| Trans-Pacific Ocean Freight | SELL | implicit | Structural reshoring and high fuel costs are permanently eroding the volume of long-haul goods coming from Asia. |
Hang on a sec…
- Fuller claims the industrial economy is 'immune' to high oil prices, yet he overlooks that sustained high energy costs eventually destroy the end-consumer demand required to purchase manufactured goods.
- The assertion that AI and automation have already solved the US labor cost disadvantage lacks granular margin data and ignores the acute shortage of skilled tradespeople needed to maintain these automated systems.
- The narrative of Mexico as a seamless alternative to China downplays significant sovereign risks, including power grid instability and escalating security concerns along major Mexican freight corridors.