Navigating Rail and Intermodal Trends Amidst Tariff Uncertainty

The latest episode of FTR’s Rail and Intermodal Update provided a wide-ranging look at critical economic developments impacting the freight rail and intermodal sectors. Here's a breakdown of the key insights shared this week.

Economic Pressures Mount as Tariff Policies Shift

• New exemptions: Recent exemptions on certain electronic goods, including smartphones (now classified under semiconductors), effectively reduced tariffs on these items to 0%.
• Conflicting negotiations: President Trump hinted at ongoing tariff negotiations with China, but Beijing quickly refuted the claim, maintaining that no discussions are underway.
• Broader economic impact: The instability has prompted warnings from U.S. business leaders (Walmart, Target) and concern from Federal Reserve Chairman Powell, while the International Monetary Fund (IMF) downgraded global growth expectations for 2025 from 3.6% to 2.8%.

Insight: Ongoing tariff volatility continues to erode confidence among consumers, businesses, and policymakers alike, contributing to broader economic headwinds.

Q1 2025 Railcar Activity: A Challenging but Manageable Quarter

The Railway Supply Institute (RSI) released its Q1 ARCI numbers, painting a cautious picture:

Despite these declines, the results were not as poor as feared given the level of economic uncertainty.

Rail Traffic Update: Mixed Signals Across North America

For the week ending April 19, 2025:

• Total rail traffic grew 1.3% year-over-year.
• Intermodal volumes rose 2.9% year-over-year.
• Carload volumes declined 0.4% year-over-year.

Carload Sector Highlights:

• Growth:
  • Grain (+4.5% YoY)
  • Grain mill products (+7.4% YoY)
  • Coal (+18.2% YoY, rebounding from previous declines)
• Declines:
  • Metallics (-10.9%)
  • Chemicals (-5.3%), particularly petroleum
  • Non-metallic minerals (-4.7%)
  • Automotive (-4.2%)
  • Forest products (-3.8%)

Carrier Trends:

• U.S. Class I carriers: +5.4% YoY, though momentum is softening.
• Canadian carriers: -2.5% YoY, a reversal from recent positive trends.
• Mexican carrier GMXT: -15.7% YoY, reflecting sharp declines.

Tariff Fallout: Early Signs of Disruption in Trade Flows

Newly implemented tariffs on Chinese goods are already showing measurable impacts:

• China-to-U.S. container bookings: Down 60% over three weeks since the exorbitant tariffs went into effect, according to Flexport
• Vessel departures from China to Southern California: Down 29% week-over-week, according to Port Optimizer

This sharp drop in Trans-Pacific shipments is expected to place further pressure on U.S. ports and supply chains, particularly along the West Coast.

Note: Even as trade shifts toward alternative sourcing countries like Vietnam and Malaysia, the near-term adjustment period could weigh heavily on North American intermodal volumes.

Final Thought

The rail and intermodal sectors face significant uncertainty, shaped largely by external policy shifts rather than underlying demand fundamentals. Staying informed on both economic policy changes and freight activity will be crucial for anticipating future movements in rail equipment demand and intermodal flows.

For ongoing updates and analysis, FTR will continue providing insights through webinars, reports, and podcasts.