April 4, 2025 | Market Update North American supply chains face a complex landscape as recent trade policy shifts create both challenges and opportunities. March brought positive momentum in several rail categories, particularly intermodal and select carload segments. However, headwinds remain. Trade policy uncertainty, manufacturing weakness, and softening consumer sentiment could weigh on future demand. Even so, recent trends suggest that underlying demand remains intact—and railroads are positioned to adapt as the economic landscape evolves. RAIL TRAFFIC SHOWS RESILIENCE U.S. railroads originated 906,253 total carloads in March 2025, up 4.5% over last March. Rail intermodal volume rose 8.0% year-over-year, its 19th consecutive gain, driven by steady consumer demand and solid port throughput. Total carloads averaged 226,563 in March 2025, the most in six months and the most for March since 2022. The AAR Freight Rail Index rose 0.7% in March, following a 1.8% increase in February, suggesting economic fundamentals remain positive despite uncertainties. CONSTRUCTION SECTOR FACES TARIFF IMPACTS Construction supply chains face severe disruption as new tariffs took effect on April 2, compounding existing material shortages and labor constraints. While construction spending rose 0.7% in February to $2,195.8 billion, the American Institute of Architects has recorded the first decline in new project inquiries since 2020. Construction input costs remain 38.7% higher than February 2020 levels, while NAHB data shows builders face approximately $9,200 in additional costs per home due to recent tariff actions. MANUFACTURING & ECONOMIC INDICATORS Rail volumes remain closely correlated with industrial production. Total U.S. manufacturing output declined slightly in both 2023 and 2024, pressuring rail volumes. The Manufacturing PMI® registered 49.0% in March, below the 50% expansion threshold, with new orders falling to 45.2%, the lowest in seven months. Despite manufacturing challenges, positive signals include:
  • Consumer spending on goods rose 0.7% in February, a welcome improvement for intermodal traffic
  • Resilient job market with 228,000 net new jobs added in March and unemployment at 4.2%
  • Auto sales reached 17.8 million annualized in March 2025, the highest in nearly four years
TRANSPORTATION COSTS OUTLOOK Recent changes in U.S. trade policy represent a notable shift from previous approaches, with significant implications for transportation costs across North America. On April 2, new tariffs took effect, including a global tariff rate of 10% on all imports not already in transit and additional reciprocal tariffs targeting exports from nearly 60 countries with rates ranging from 11% to 50%. These policy shifts are reshaping the economics of surface transportation. While rail offers significant cost advantages for long-haul shipping, the differential in cost between truck and rail is approximately $0.105 per ton-mile, with multimodal strategies combining rail and truck able to cut transportation costs by more than half compared to truck-only shipping. According to industry forecasts, pricing is expected to shift more favorably for carriers after a prolonged period of suppressed margins, with projections indicating significant rate increases by the second quarter of 2025. The U.S. Freight and Logistics Market is expected to reach $1,381.09 billion in 2025 and grow at a CAGR of 3.84% to reach $1,667.74 billion by 2030, driven by substantial infrastructure investments and technological advancements. Despite ongoing challenges including manufacturing weakness, logistics costs for U.S. businesses have begun to stabilize, though prices remain higher than pre-pandemic levels, with significant recovery in transportation rates not expected until late Q4 2025 due to excess capacity and fluctuating demand. Sources: U.S. Census Bureau | NAHB | Dodge Construction Network | ING | Association of American Railroads