The North American intermodal market stands at a pivotal juncture, navigating dramatic shifts in international trade patterns and subtle transformations in domestic transportation demand. At the recent RailTrends conference in New York, Larry Gross, president of Gross Transportation Consulting and an intermodal expert, delivered a comprehensive analysis of current market conditions, revealing the underlying drivers of this complex landscape and identifying key areas for future growth.
International Freight Winter vs. Domestic Freight Spring: A Tale of Two Markets
The RailTrends conference, co-hosted by Progressive Railroading magazine and rail analyst Tony Hatch, brought together industry leaders to examine emerging trends and challenges. Gross highlighted how international and domestic intermodal volumes are being shaped by divergent economic forces, creating what he described as "a tale of two markets."
The sharp decline in international freight volumes stems primarily from the "pull-forward" effect seen earlier this year as shippers rushed to avoid anticipated tariffs. This artificial demand surge created subsequent weakness in international shipments, injecting uncertainty into the intermodal market. In contrast, domestic volumes have shown consistent growth since June, buoyed by seasonal retail inventory buildup and agricultural shipments.
Gross emphasized the importance of adjusting for monthly variations in business days when evaluating market performance. October 2023 saw an unusually high number of business days, creating a misleading 7% apparent month-over-month growth from September. After adjustment, the data revealed significant declines—a reminder that surface-level statistics can obscure true market conditions.
Cross-Border Dynamics: Canadian Weakness vs. Mexican Strength
The cross-border intermodal picture shows stark contrasts between northern and southern trade flows. U.S.-Canada shipments have weakened under tariff pressures, demonstrating how trade protectionism impacts transportation networks. Meanwhile, U.S.-Mexico trade continues its robust expansion, fueled by Mexico's manufacturing growth and revised NAFTA provisions.
For the first time since 2019, Gross noted, intermodal activity has resumed normal seasonal patterns after years of pandemic-related distortions. The peak season arrived early in 2025 (week 35 versus the typical week 39), with delayed peaks in 2023-24 attributable to tariff effects. Gross projects negative year-over-year growth for U.S. domestic intermodal through early 2026, signaling continued challenges ahead.
The Domestic Battleground: Where Intermodal's Future Will Be Decided
"The arena where intermodal truly controls its destiny is the domestic market," Gross asserted. "This is the real battleground between intermodal and truckload." Since 2016, intermodal's share of the U.S. long-haul dry van and refrigerated market has stagnated around 6%, down from 7%, despite a brief uptick last year.
The three-year freight recession and post-pandemic truck capacity glut represent only part of a deeper structural issue. While GDP has grown 21% since 2015, trucking growth has lagged slightly due to the economy's service sector shift (which generates less freight demand) and increasing short-haul trucking trends. Intermodal growth trails both GDP and trucking metrics, with freight volumes up just 4-5% over the past decade.
Pathways to Growth: Optimizing Domestic Networks
Gross identified domestic network optimization as the key to market share gains. Currently, 1,000-2,000 mile lanes (typically requiring two railroads) underperform compared to both shorter single-railroad routes and certain longer western corridors. Bringing these middle-distance lanes up to parity could increase U.S. freight volumes by 8%, while achieving midpoint performance between short and long hauls could yield 25% growth.
"Rail mergers represent one potential solution, but not the only approach," Gross noted, suggesting operational improvements and enhanced coordination could also drive efficiency gains.
Critical Variables Shaping Intermodal's Future
Several external factors could significantly impact intermodal performance:
Global Shipping Routes: Full reopening of Red Sea/Suez Canal transit would make East Coast ports more competitive, potentially increasing intermodal opportunities for inland moves.
Trucking Policy: U.S. immigration and commercial licensing regulations may affect driver availability, potentially tightening truck capacity and raising rates.
Geopolitical Risks: Ongoing uncertainties include Panama Canal restrictions, Section 301 tariffs, and evolving trade policies involving China and Canada.
Looking ahead, Gross anticipates continued international freight pressure, stagnant truckload demand, possible modest intermodal gains if truck capacity tightens, and difficult year-over-year comparisons through early 2026.
Conclusion: Innovation and Collaboration as Imperatives
Facing these complex challenges, intermodal operators must focus on domestic network optimization, technological innovation, and strategic partnerships to regain market share. The path forward requires improving efficiency, reliability, and cost competitiveness—particularly in middle-distance lanes where intermodal currently underperforms.
In an era of trade uncertainty and economic transition, the intermodal sector's ability to adapt its domestic operations will determine whether it can capitalize on emerging opportunities or cede further ground to trucking competitors.