If global trade were a chessboard, freight markets would be the pieces—their movements directly reflecting the pulse of economic activity. As geopolitical tensions reshape the board with rising tariff barriers and wavering consumer confidence, where is the freight market headed? The TD Cowen/AFS Freight Index Q2 Report serves as a guiding light through this uncertain terrain, revealing how trade disputes, demand fluctuations, and capacity adjustments are shaping the present and future of U.S. freight markets.
TD Cowen/AFS Freight Index: A Barometer for Market Trends
The TD Cowen/AFS Freight Index—a collaborative effort between New York investment firm TD Cowen Inc. and Louisiana-based logistics provider AFS Logistics—stands as an authoritative benchmark for freight market analysis. By integrating AFS Logistics' extensive shipment data across transportation modes with machine learning analytics, the index provides comprehensive insights into market conditions. It incorporates macroeconomic factors and microeconomic details, including recent General Rate Increase (GRI) announcements from major parcel carriers, to assess their market impact.
"Tariffs have become a boardroom topic," noted AFS Logistics CEO Andy Dyer. "When combined with an uncertain macroeconomic outlook, these policy changes create an environment of caution. Current conditions don't suggest any recovery from the prolonged soft demand in domestic transportation markets."
Trucking: Short-Term Gains Mask Structural Challenges
The Q2 2025 truckload rate-per-mile index slightly exceeded expectations at 5.9% above the January 2018 baseline. This temporary boost stems from inventory surges ahead of new tariffs, wildfire disruptions, and ongoing capacity adjustments. However, the accelerating shift toward shorter hauls (under 500 miles) has reduced per-shipment costs to just 5% above pre-pandemic levels—the lowest point in three years—reflecting broader regionalization and inventory decentralization trends.
Key factors reshaping trucking markets:
- Tariff-driven inventory strategies: Businesses are front-loading shipments to mitigate potential tariff impacts, creating temporary demand spikes.
- Natural disasters: Wildfires and floods disrupt routes and capacity, while carriers recalibrate networks to match evolving demand patterns.
- The short-haul revolution: E-commerce growth and consumer expectations for rapid delivery are shrinking average shipment distances.
- Regional distribution networks: Companies are adopting localized fulfillment centers to reduce transit times and costs.
Despite these adaptations, the sector faces persistent challenges including overcapacity, soft demand, and intermodal competition—requiring carriers to maintain operational flexibility.
Parcel Shipping: The New Calculus of Dynamic Pricing
The era of predictable annual rate hikes is over. Over the past 18 months, FedEx and UPS have deployed increasingly nuanced pricing strategies—implementing ZIP code-based adjustments, new administrative fees, and accelerated fuel surcharge changes despite an 8.4% decline in diesel prices. These moves reflect carriers' attempts to offset volume declines through yield management.
Market dynamics at play:
- Fluid pricing models: Carriers now adjust rates more frequently through targeted fees rather than blanket increases.
- Fuel surcharge paradox: Despite falling diesel prices, UPS ground fuel fees rose 15% year-over-year while FedEx's increased 12%.
- Ground network optimization: Improved ground service reliability allows shippers to divert volume from premium air services.
- Competitive pressures: USPS's expansion of Priority Next-Day service to 54 markets intensifies competition for time-sensitive shipments.
The Q1 2025 parcel pricing index rose 5.2% quarter-over-quarter before an anticipated modest decline to 3.1% in Q2.
LTL Shipping: Defying Economic Headwinds
Less-than-truckload (LTL) pricing continues its resilient performance, with Q1 rates rising 1.5% quarterly and 0.5% annually despite shorter hauls and lighter shipments. The sector benefits from:
- Density economics: Consolidated shipments improve asset utilization.
- Specialized services: Temperature-controlled and hazardous material capabilities create niche advantages.
- Transparent pricing: Weight/distance-based models provide cost predictability for shippers.
Projected to mark its sixth consecutive quarter of year-over-year growth, the LTL sector nevertheless contends with capacity constraints and labor shortages.
Market Outlook: Adaptation as the New Constant
The freight sector's trajectory remains contingent on trade policy developments, consumer spending patterns, and carriers' ability to right-size capacity. While trucking faces structural recalibration, parcel carriers navigate yield management complexities, and LTL providers capitalize on resilient demand—all market participants must maintain operational agility in this evolving landscape.