Intermodal Transport: Riding the Surge in Freight Demand Amid Tariff Volatility

The U.S.-China 90-day tariff truce, announced on May 12, 2025, has reignited a critical debate in the logistics sector: which mode of transport will dominate the rebound in freight demand? The answer lies in intermodal rail transport, which stands to capitalize on a perfect storm of tariff-driven cost pressures, trucking capacity constraints, and shifting trade patterns. For investors, this presents a high-conviction opportunity in rail operators like Union Pacific (UNP) and CSX (CSX), as the freight market’s structural shift toward rail becomes undeniable.

The Tariff Truce: A Catalyst for Import Rebound

The truce’s reduction of U.S. tariffs on Chinese goods from 145% to 30% has already triggered a 16.3% surge in January 2025 imports compared to the same period in 2024. While February’s volumes dipped slightly, the trend is clear: businesses are reactivating supply chains disrupted by years of trade volatility. However, this rebound is not flowing equally to all transport modes.

SONAR data reveals a stark divergence:
- Trucking demand (measured by the OTVI.USA index) declined 0.9% month-over-month in March 2025, with dry van and reefer volumes falling further.
- Rail (intermodal) demand, meanwhile, is rising as importers prioritize cost efficiency and lead-time flexibility.

The OTRI.USA index (a measure of trucking capacity tightness) remains stubbornly elevated near 5–7%, signaling no relief for trucking’s capacity crunch. This dynamic creates a golden opportunity for rail, which offers lower costs and scalability to absorb the tariff-driven import rebound.

Why Rail Wins the Cost and Capacity Battle

1. Cost Efficiency:
   Intermodal rail is 20–30% cheaper than trucking for long-haul freight. With tariffs still at 30%, companies are under pressure to reduce logistics costs—and rail’s economies of scale are a natural solution.

2. Lead-Time Flexibility:
   The truce’s 90-day window has created urgency to secure imports before potential tariff re-escalation. Rail’s ability to handle bulk shipments over extended routes—without the driver shortages plaguing trucking—makes it ideal for “warehouse on wheels” strategies, where goods are transported slowly to avoid inventory risks.

3. Structural Shift in Trade Patterns:
   SONAR’s Intermodal Tender Rejection Index (IMOTRI) shows loosening capacity in key ports like Los Angeles (IMOTRI.LAX fell to 1.09%), while trucking’s OTRI remains tight. This imbalance signals a permanent migration of freight volume to rail, not just a temporary blip.

Data-Driven Validation: SONAR’s Signals Are Clear

The numbers tell a compelling story for rail investors:
- Trucking’s OTVI decline: A 0.7% monthly drop in tender volumes (March 2025) aligns with flatbed’s 55.4% MoM surge, suggesting shippers are favoring rail for bulk goods and reserving trucking for high-value, time-sensitive freight.
- Rail’s competitive edge: The IMOTRI.CHI (Chicago) remains at 0%, indicating ample capacity in rail corridors—unlike trucking’s strained networks.

The Investment Thesis: Buy Rail Before the Surge

The truce’s 90-day window is a critical inflection point for investors:
- Volume Spikes Ahead: SONAR’s IOTI.USA (import tender index) has already rebounded from a 60% post-tariff collapse, and further tariff reductions could trigger a “violent snapback” in imports.
- Tailwinds for Operators:
- Union Pacific (UNP): Dominates high-volume rail corridors and has $15 billion allocated for network upgrades to handle growing intermodal demand.
- CSX (CSX): Leverages its Midwest-to-East Coast routes, with 15% YoY growth in intermodal volumes in 2024.

Risks? Yes—but They’re Manageable

• Regulatory Uncertainty: The English-language mandate for drivers could tighten trucking capacity further, favoring rail.
• Tariff Volatility: If the truce collapses, rail’s cost advantage becomes even more critical.

Conclusion: Act Now—The Freight Shift Is Already Underway

The data is unequivocal: trucking’s capacity crisis and rail’s cost efficiency are driving a structural shift in freight logistics. With the U.S.-China trade truce unlocking a rebound in imports—and with rail operators like UNP and CSX positioned to capture the upside—the time to invest is now.

The freight market’s surge isn’t just imminent—it’s already here. Act fast before the rail rebound becomes the market’s new consensus.

This article is for informational purposes only. Investors should conduct their own research and consult financial advisors before making investment decisions.