Hey there, folks. If you’ve been trying to keep up with tariff news lately and feel like you’ve missed a few plot twists—don’t worry, you’re not alone. The past few weeks have been a whirlwind of trade policy drama, retaliatory measures, and market reactions. Let’s break it down in plain English and talk through what it might mean for inflation, freight, and the rail market.
Earlier this year, we were prepping for a big shift in U.S. trade policy—something called reciprocal tariffs. In theory, it was a move to match the import duties that other countries place on American goods. The logic: if they charge us 25% on our imports, we’ll charge them the same.
Simple, right? Well, the actual policy that materialized didn’t quite follow that mirror approach.
Instead of tit-for-tat tariffs, the new policy aimed to address trade imbalances more broadly. This included a baseline 10% tariff across all countries, with higher tariffs for those where the U.S. has a greater trade deficit. The exception is for goods from Canada and Mexico which are covered under USMCA.
However, the day these reciprocal tariffs were set to go into effect, President Trump announced a 90-day pause for most countries. This pause, however, does not apply to the steel, aluminum, and auto tariffs already put in place.
Here are a few key details:
China: China was not granted a 90-day pause, and in response to retaliatory actions taken the effective tariff rate skyrocketed to 145%. Yes, you read that right. For every $1 worth of goods imported from China, the U.S. will now collects $1.45 in tariffs. However, over this past weekend exceptions were made for certain electronic products.
European Union: The effective tariff rate was set to jump to 24%, but was temporarily dropped down to 12%, due to the reprieve.
Canada & Mexico: Not subject to the reciprocal tariffs. However, with the already implemented tariffs on non-USMCA goods, as well as metals, the effective tariff rate now stands at 12%.
So even though the U.S. backed off its reciprocal tariffs for now, the effective average tariff rate, as of Friday the 11th, is actually higher than the original plan, due to the steep increases on China.
Using the Fed’s own estimates, where about 10% of U.S. consumer spending is import-based, a 30% effective tariff rate adds about 3% to overall inflation—up from the 2.4% inflationary impact expected under the original plan.
While tariffs have taken center stage, rail traffic’s been quietly doing its thing—and lately, it’s been looking up.
Total rail traffic is up 7.0% year-over-year.
Carloads grew by 3.7%, with a big assist from coal (no surprise given the weak 2024).
Intermodal is leading the charge, up 10.3% year-over-year across North America.
U.S. carriers saw a 13.6% spike in intermodal, though growth in Canada and Mexico was more modest—or even negative in Mexico’s case.
Even with today’s strong intermodal growth, expect that momentum to cool—especially if tariffs on Chinese goods remain sky-high. Given China’s share of ocean freight, it’s a safe bet that intermodal volumes will feel the sting in the second half of the year.
As always, if you want help unpacking how these developments might affect your corner of the freight world—commodities, specific trade lanes, or even port activity—reach out. We’re tracking this daily.
Let’s keep the conversation going.
—Joseph Towers,
Host, FTR’s Rail & Intermodal Update