The North American intermodal market is experiencing unprecedented divergence in today's rapidly evolving global trade environment. Larry Gross, president of Gross Transportation Consulting and a veteran intermodal expert, delivered a thought-provoking analysis at the recent RailTrends conference in New York, examining the market's complexities and offering unique insights into future trends.
International Freight Under Pressure: Dual Impact of Tariffs and Early Pulling
Gross highlighted significant downward pressure on international freight volumes, primarily driven by tariff policies and resulting early inventory pulling. "The tariff situation created an early pull of freight earlier this year, which is now causing international volumes to plummet," he explained. This artificial demand surge in the first half of the year has depleted second-half requirements, creating substantial adjustment pressures.
The U.S. imposition of additional tariffs on certain imports prompted businesses to accelerate shipments before implementation, leading to port congestion, warehouse overflow, and strained supply chains. When tariffs took effect, import demand sharply declined, triggering a dramatic contraction in international freight volumes.
Domestic Resilience: Seasonal Patterns and Economic Fundamentals
In contrast to international softness, domestic freight demonstrates notable resilience. "Domestic performance is much more favorable," Gross noted, attributing monthly volatility largely to varying workday counts. October's peak workdays generated approximately 7% sequential growth, but even when adjusted, international declines remain steep while domestic trends show consistent improvement.
Seasonal retail inventory builds for holiday demand and cyclical construction/manufacturing activity support domestic volumes. Strong consumer spending and labor market health further reinforce this segment's stability.
Cross-Border Split: Canada Weakness vs. Mexico Strength
Cross-border intermodal reveals stark contrasts - U.S.-Canada flows suffer from trade tensions while U.S.-Mexico transportation thrives. Updated NAFTA provisions and Mexico's cost/location advantages fuel exceptional growth in southern corridors, whereas northern routes face persistent headwinds.
Normalization Emerges: Return to Seasonal Patterns
"We're now seeing normal seasonal intermodal patterns for the first time since 2019," Gross observed, marking the end of pandemic-driven distortions. Traditional peak periods around holidays and harvest seasons are re-establishing predictable rhythms after years of supply chain chaos.
Structural Challenges: Market Share Erosion and GDP Shifts
A troubling long-term trend shows intermodal's domestic market share stagnating near 6%, down from 7% in 2016. Gross attributes this to trucking's improved competitiveness and fundamental economic changes: "Services now dominate GDP growth, and they don't require freight movement. Even trucking faces shorter-haul trends that disadvantage intermodal."
The expert warned against expecting automatic recovery: "We're looking at freight volumes barely 4-5% above 2014 levels. Waiting for perfect conditions won't solve this structural problem."
The "Donut Hole" Opportunity: Untapped Potential
Gross identified a critical efficiency gap in 1,000-2,000 mile routes requiring multiple railroads - the "donut hole" where volumes trail shorter and longer hauls. Addressing this through operational improvements could generate 8-25% volume growth. "Rail collaboration doesn't require mergers, just smarter coordination," he emphasized.
External Wildcards: Geopolitics and Policy Impacts
Key variables requiring monitoring include:
• Red Sea/Suez Canal reopening potentially shifting Asian imports to East Coast gateways
• Trucking capacity constraints from driver supply policies
• Ongoing uncertainties around Panama Canal restrictions and Section 301 tariffs
Outlook: Persistent Pressures With Selective Opportunities
Gross anticipates continued international softness and domestic challenges through 2026, though potential trucking constraints could create modest intermodal gains. The path forward requires focused improvements in domestic service quality and operational efficiency rather than relying on market conditions.
This nuanced analysis paints a picture of an industry at a crossroads - facing significant structural headwinds but possessing clear avenues for targeted improvement in specific market segments.