As global trade volatility becomes the new normal and prolonged economic slowdown raises concerns, North America's intermodal market faces unprecedented challenges and opportunities. At the recent RailTrends conference in New York, Larry Gross, president of Gross Transportation Consulting and an intermodal expert, revealed a market divided along two distinct trajectories: domestic versus international intermodal shipping.
International Intermodal: Decline Under Tariff Pressures
"Earlier this year, we saw a pull-forward effect in international volumes due to tariff policies, but now we're witnessing a cliff-like drop," Gross observed. The weakening international intermodal sector reflects broader global trade tensions and geopolitical risks. Events like the Red Sea crisis and Suez Canal congestion could potentially reduce shipping costs and transit times from Asia to the U.S. East Coast, diverting freight from West Coast routes and creating opportunities for East Coast intermodal networks that rely more heavily on inland transportation.
Domestic Intermodal: A Beacon of Growth
In stark contrast, domestic intermodal has shown steady growth since June, primarily driven by seasonal factors. While monthly fluctuations occur due to varying numbers of working days, the underlying upward trend remains clear after adjusting for these variations. "Domestic intermodal represents the true battleground where rail competes directly with trucking for market share," Gross emphasized.
Cross-Border Trends: Canada Struggles, Mexico Thrives
The cross-border picture shows mixed results: U.S.-Canada trade suffers under tariff pressures while U.S.-Mexico trade demonstrates robust growth. Notably, the intermodal market has returned to normal seasonal patterns since mid-year—the first such occurrence since 2019.
2025 Outlook: Earlier Peak, Persistent Challenges
Gross predicts the 2025 intermodal peak season will arrive around week 35, significantly earlier than the typical week 39 pattern. Recent years saw delayed peaks due to tariff-related pull-forward effects. Looking further ahead, he anticipates negative year-over-year comparisons for U.S. domestic intermodal through late 2025 and into early 2026.
Market Share: A Decade of Decline
Since 2016, intermodal's share of the U.S. long-haul, dry van, and refrigerated truckload market has steadily eroded from a peak of 7% to about 6%. A brief rebound a year ago proved unsustainable. Multiple factors contribute to this decline: prolonged freight recession, post-pandemic truck capacity glut, the growing service sector's share of GDP, and trucking's shift toward shorter hauls.
"This isn't just a three-year problem—intermodal volume has grown only 4-5% compared to a decade ago. Waiting for market conditions to improve won't suffice; without proactive changes, significant growth and market share recovery remain unlikely," Gross warned.
The solution, according to Gross, lies in domestic intermodal expansion. He cites the example of 2,000-2,500 mile western single-line shipments achieving much higher market share than longer hauls requiring multiple railroads.
"Currently, the 1,000-2,000 mile segment underperforms even the 750-1,000 mile range due to the 'donut hole effect'—inefficiencies when two railroads are involved," Gross explained. "Elevating the donut hole segment's market share to match shorter hauls could increase U.S. freight volume by about 8%. Achieving mid-point performance between the 750-1,000 and 2,000-2,500 mile segments could drive 25% growth. Railroad consolidation offers one potential solution, but certainly not the only path forward."
Key Uncertainties Ahead
Gross identified several variables that could reshape the intermodal landscape:
Global Shipping Routes: Full reopening of Red Sea and Suez Canal routes would reduce Asia-to-East Coast shipping costs and transit times, potentially shifting more imports from West to East Coast ports and creating intermodal opportunities.
Trucking Capacity: U.S. policies affecting immigration and non-local commercial driver's licenses could impact truck driver availability. Regulatory changes might tighten truck capacity and raise rates.
Other Factors: Panama Canal restrictions, Section 301 tariff developments (including suspensions and legal challenges), and ongoing trade uncertainties with China and Canada require close monitoring.
Cautious Optimism for the Future
Gross concluded with several key observations: the peak season may have passed; international volumes face continued pressure; domestic truck freight demand shows little improvement potential; intermodal could see modest recovery if driver shortages tighten truck capacity; year-over-year comparisons will remain challenging through late 2025 and early 2026; and overall 2026 freight volumes appear likely to stay flat or decline slightly.