Market Update May 2025

The Freight Economist

May 2025

Executive summary

Monthly economic and market update

Carrier profitability fell to its lowest level since Q1 2010 (ACT Research).

U.S. economy

U.S. GDP

Tariff deals

Recession implications

Freight demand

Imports

Truck tonnage

Manufacturing

Retail sales

April’s imports surpassed expectations despite tariff disruptions. U.S. container imports increased by 1.2% in April and 9.1% year-over-year, marking the second-highest April on record. Notably, imports from China rebounded by 5.4%, offsetting the sharp 12.6% decline in March. Descartes suggests this surge in Chinese imports was likely due to front-loading before the 145% tariffs took effect on April 9th. Imports from China's rising competitors also showed strong growth, with Vietnam up 32.5% year-over-year and Thailand up 13.4%.

Imports

What does it mean for truck tonnage?

Retail sales

Key data points and commentary

Trucking volume

Intermodal rates

Geographic trends

Routing guide trends

Geographic trends

Trucking volume

The Cass Freight Shipments Index rose 0.3% in March, but remained down 3.7% year-over-year. Pre-buying may have contributed to April's increase, despite negative sentiment preceding the trade deal. Conversely, the American Trucking Associations (ATA) For-Hire Truck Tonnage Index declined 1.5% in March following a strong February. This index showed a 0.2% increase from the previous year, marking its third consecutive year-over-year gain and suggesting that the freight market was headed towards recovery before tariff announcements.

Intermodal rates

In January, average weekly intermodal loads decreased by 3.7%, and weekly carloads dropped by 4.7%. However, compared to the same time last year, intermodal volumes were significantly higher, up 11%, and carloads increased by 2.1%. It's worth noting that this January's declines were less severe than those of the previous year, which saw 7.7% and 9.3% reductions in intermodal and carload loadings, respectively.

Mazen’s work focuses on analyzing the freight transportation landscape, and producing short- and long-term forecasts based on supply and demand dynamics. He is also a research affiliate with the Intelligent Transportation Systems (ITS) Lab at MIT, where he completed his PhD in 2019. His work falls at the intersection of ITS, economic modeling, and analytics.

mdanaf@uberfreight.com

By Mazen Danaf, Senior Economist and Applied Scientist, Uber Freight

Featuring insights and contributions from Uber Freight leadership, technologists and market specialists.

The first tender acceptance rate rose from 92% in March to 93% in April, and routing guide compliance remained near its record high level, at 95%. Carriers rarely rejected any loads, and even when they did, the added cost to the shipper was minimal, only about 1% higher than the primary carrier cost. Flatbed tender acceptance rates fell in March, however, this was due to seasonality, and not structural tightening. While van and reefer typically see seasonal softness in Q1, this period marks the start of flatbed peak season.

The U.S. Gross Domestic Product (GDP) dipped by -0.3% in Q1, as a surge in imports and pre-stocking took center stage. Imports, which count negatively towards GDP, dragged it down significantly by 5%. This was partially balanced by a 2.3% rise in private inventories, which was also import-driven, as pre-stocking led to ballooning inventories. Notably, Q1 saw slight dips in durable goods spending (-0.3%) and government spending (-0.3%).

Executive summary

U.S. economy

Freight demand

Freight supply

U.S. GDP

Average m/m and y/y van spot rate index by destination regions – August Source: DAT

Consistent with seasonal expectations, outbound spot rates fell for loads from the West, Midwest, and Northeast regions, with the largest increase being in the Midwest (-3.3%). Meanwhile, rates rose in the Southwest (2%) and Southeast (0.8%). This is likely due to early produce volumes, as produce season usually begins in southern markets and propagates northwards. Compared to the year-ago levels, rates in the Northeast and Southwest were significantly higher, close to 8% year-over-year, while rates in the remaining regions were only higher by low single- digit percentages.

Key data points

Shipper and carrier insights: Chemical edition The chemicals sector has been a bright spot in the economy.

Sales slowed down in April except in food services. Retail sales edged up 0.1% in April, a significant slowdown from March's substantial 1.7% gain. However, these increases do not signal broad consumer strength. March's surge was solely attributed to motor vehicles and parts purchases, likely driven by impending tariffs. In April, growth was concentrated in food services and drinking places, while spending on goods faltered. Key freight-generating sectors, including motor vehicles, e-commerce, apparel, electronics, and general merchandise, experienced month-over-month declines or minimal growth. Despite these weak recent months, overall retail sales remain 5.1% higher than the previous year. Excluding food services and drinking places, the year-over-year increase stands at approximately 3.5%.

Recession risks

Retail and food service sales climbed 1% in July, primarily boosted by a 3.6% surge in motor vehicle and parts dealers. Excluding this sector, sales edged up 0.4% from the previous month and were 3.1% higher compared to the same time last year. Importantly, this sales growth outpaced the rate of inflation for goods, which actually decreased over the past 12 months.

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Truckload demand rose in March. Pre-buying before tariffs likely increased truckload demand in March, particularly within the wholesale sector. Several major freight-producing categories experienced sales growth, including household appliances (2.6%), alcoholic beverages (1.9%), and miscellaneous nondurable goods (3.6%). This strength is unlikely to extend into April. Although retail and manufacturing demand each saw a modest 0.1% increase in March, both sectors are expected to weaken in April due to softer retail sales and a 0.6% decline in manufacturing output (adjusted for tonnage).

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The U.S. Gross Domestic Product (GDP) saw a slight contraction of -0.3% in Q1, largely due to a surge in imports and pre-stocking activities. However, despite this dip and ongoing tariff uncertainty, the U.S. economy has demonstrated underlying resilience. The unemployment rate has remained steady between 4.0% and 4.2% in recent months, supported by continued consumer spending, which was up approximately 3.3% year-over-year in March.

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Intermodal rates declined by 0.9% in April. Excluding fuel costs, the decrease was 0.6%, and rates were down 2% to 4% year-over-year. Historically, intermodal rates lag truckload rates by a quarter. With truckload contract rates remaining flat, intermodal rates are likely near their lowest point. Significant increases in intermodal rates are also unlikely until truckload rates recover. Despite tariff uncertainty, intermodal volumes in the U.S. remained about 5% higher year-over-year in April and early May.

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Shipper and carrier insights

Adjusted for inflation, current freight rates are at their lowest point since 2008, a period encompassing the Great Financial Crisis (GFC). During the GFC, spot rates experienced peak-to-trough declines of 43%, while contract rates fell by 10%. The 2022-23 freight recession saw even steeper drops of 45% and 17% in spot and contract rates, respectively. Consequently, although the current low rates offer some relief for shippers, further declines may be limited, even in the event of a recession.

Recession implications

Several sources indicate a recent decrease in the probability of a U.S. recession in 2025. J.P. Morgan Research has lowered its estimated probability of a U.S. recession in 2025 to below 50%, down from a previous 60%. They attributed this to recent de-escalation in trade tensions, particularly between the U.S. and China. Similarly, the International Monetary Fund (IMF) recently increased its estimated probability of a U.S. recession in 2025 to 40%, up from 25% in its previous outlook. Beyond tariff uncertainty, the U.S. economy has shown resilience. The unemployment rate has remained stable between 4.0% and 4.2% in recent months, and consumer spending continued its growth, up approximately 3.3% year-over-year in March.

Recession risks

In the long run, tariffs might boost domestic freight by giving local manufacturers an edge. However, the magnitude and sudden implementation of tariffs means we probably won't see benefits for a while, and the immediate damage will be greater. Unlike Canada and Mexico, the 10% percent tariffs on Chinese products went into effect on February 4, and are likely to stay. Tariffs on China were already anticipated by shippers, some of which pulled imports forward in 2024. A survey of Uber Freight shippers found that the majority do not foresee immediate changes to their networks. However, a significant minority (42%) are actively assessing various options. Some shippers reported that they anticipate absorbing cost increases and subsequently passing those increases on to their customers. Seventeen percent of shippers indicated they are pre-stocking cross-border inventories. In contrast, very few are exploring domestic alternatives or alternative vendors in countries not impacted by tariffs. Some expressed concerns that it will take several months to adapt their networks.

Tariff deals

The U.S. manufacturing sector continued to contract. The ISM PMI fell to 48.7 in April, back to contraction after a brief period of growth. Only three components of this index expanded: Inventories, Supplier Deliveries, and Prices. This reflects manufacturers proactively securing inventories ahead of tariffs, rather than indicating robust demand. Inflation in commodity and raw materials prices accelerated, with the ISM Prices index registering 69.2, the highest since June 2022.

Manufacturing

The ISM report also highlighted widespread concerns among manufacturers about declining demand and order levels. Respondents across various sectors expressed pessimism about the near-term outlook.

Manufacturing

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Freight supply

Spot rates

Tractor orders

Supply and demand indices

Driver employment

Following the surge in wholesale activity ahead of tariffs, our national truckload demand index increased by 0.6% in March, mirroring February's gain. This index was 1.4% higher year-over-year and significantly surpassed the supply index for the first time since early 2022. Meanwhile, the supply index remained unchanged in March and was down 0.6% year-over-year. Should this trend persist, and assuming no tariff-related disruptions, the market could be on a path to resuming its recovery later this year.

Truckload supply and demand indices

Supply hasn’t reacted to tariffs (yet). Trucking employment saw a modest 0.1% increase in April, yet remained 0.3% below April 2024. However, recent growth in employment appears to be concentrated in specialized freight. The long-distance truckload sector experienced a 0.1% employment decrease in March and was 1.2% lower compared to March 2024. After two years of capacity correction, trucking employment stabilized near the pre-COVID level of January 2019 Interestingly, wages in the long-distance truckload sector fell 1.1% in March as carriers’ hiring appetite remained muted. Wages in this sector were 1.7% lower year-over-year, a stark contrast to the 3.8% growth in wages across the U.S. economy.

Driver employment

The spot market continued its seasonal softening in April. Dry van spot rates declined 1.9% from March, following a similar 1.2% decrease the previous month. Despite these drops, rates remained 2.6% higher year-over-year. Conversely, flatbed rates experienced a significant surge of 2.9% in April, building on March's 5.6% increase. While March and April typically see strong flatbed demand, rate increases surpassed seasonal expectations, rising 7.6% above April 2024 levels. Meanwhile, contract rates for van and reefer remained stable, while flatbed contract rates rose 0.7%, mirroring the spot market gains. Following International Roadcheck week in mid-May, dry van and refrigerated spot rates experienced their usual seasonal increase. Rates are anticipated to remain elevated through July with the start of the summer produce season.

Spot rates

Market conditions

After a period of seasonal softness, the U.S. truckload market is now anticipating its typical seasonal surge in the latter half of May. As expected following the mid-May International Roadcheck week, dry van and refrigerated spot rates have begun their usual seasonal climb and are projected to remain elevated through July, driven by the onset of the summer produce season.

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Class 8 tractor orders plummeted after tariff announcements. While trucking employment has recently increased, Class 8 demand was hit particularly hard hit in April, with orders falling to a 61-month low of 8,900 units, a 52% y/y decline and 47% m/m decline on a seasonally adjusted basis. ACT Research attributed this decrease to carrier profitability falling to levels not seen since Q1 2010, according to public truckload carrier balance sheet data.

Tractor orders

U.S. manufacturing stagnated in the second half of 2022. In contrast, chemical manufacturing has shown recent strength, particularly in pharmaceuticals and agricultural chemicals. Chemical manufacturing shipments have increased significantly, up 45% from pre-pandemic levels in Q1 2020, with pharmaceutical and agricultural shipments rising by 56% and 60%, respectively.

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In the freight market, the latest trade deal with China offers a positive outlook, reducing the weighted average tariff rate from 28% to 17.8%. This agreement facilitates a gradual decoupling without a complete cessation of trade between the two countries.

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Could a recession decrease freight rates further?

Industrial production of machinery, primary metals, and fabricated metals has remained relatively flat or slightly declined over the past year. A recovery in these sectors seems unlikely in the near future, as orders and shipments of core capital goods—a key indicator of manufacturing activity—have also stagnated. Orders for core capital goods, which are nondefense capital goods excluding aircraft, are considered an early indicator of manufacturing activity. Weak orders and shipments in this sector suggest that a broader economic recovery may be delayed.

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Industrial equipment and supplies

Automotive

Auto manufacturing has been one of the bright spots in the economy over the past year, driven by pent-up demand and a shortage of vehicles at dealerships. While production rose to meet demand, the market is starting to show signs of saturation, with inventories gradually normalizing and potential glut looming on the wholesale side.

Paper and plastics

Paper and plastics are highly used in the packaging industry, which has been affected by the recent slowdown in food spending after the economy re-opened. In addition, the demand for paper products was already on a downward trajectory due to factors such as digitalization, adoption of alternatives (plastics), and growth of e-commerce. The pandemic further accelerated this decline. Moreover, a surge in downstream inventories led to a slowdown in manufacturers’ demand.

Nondurable consumer goods

Demand for food consumed at home fell from its pandemic highs as the economy re-opened, normalizing back to its pre-pandemic levels. Demand for other consumer goods (such as apparel) continues to be pressured by external competition, slowing consumer demand, and high downstream inventories.

Durable consumer goods

Durable consumer goods such as appliances, furniture, and wood products are affected by the ongoing housing recession. New home sales remain below the 2019 levels, and about 30% below the pandemic peak. Similarly, housing starts are at their lowest level since the beginning of the housing recession, 32% below the 2022 peak.

Tariff deal tempers recession predictions.

The U.S. economy contracted in the first quarter.

U.S. / China tariff agreement provides relief for shippers. The latest trade deal with China is a positive development for the freight market, lowering the weighted average tariff rate from 28% to 17.8%. If shippers substitute some Chinese imports with goods from other countries, this average tariff rate could decrease further, potentially settling between the baseline of 10% and the 17.8% estimated from 2024 import data. Our estimates indicate that a 1% increase in the average tariff rate reduces freight demand by approximately 0.2%. Consequently, the latest deal suggests that only about 2% of freight volumes are at risk, a reduction from the previously estimated 4% to 6% under the pre-deal tariff range of 18% to 28%.

Tariff deals

Shipment growth has exceeded restocking, resulting in lean inventories within the chemicals sector. Consequently, the inventories-to-sales ratio fell to its lowest level since 2016, particularly in pharmaceuticals and agricultural chemicals.

Chemical freight rates remain relatively high. The strong demand for chemical manufacturing also presents a cost for shippers. Unlike truckload rates, bulk and tanker freight rates have remained relatively stable despite the freight recession. Tanker rates have stayed near record highs, largely unaffected by the recession, and are 5% to 9% higher year-over-year. In contrast, dry van contract rates bottomed out in 2024, falling about 20% from their peak. Their recovery has been minimal, currently only around 1% higher year-over-year. Specialized freight rates followed a similar pattern but with a less severe decline and are now about 2% higher year-over-year.

While chemical demand remained robust, specialized and tanker freight did not experience the post-pandemic excess capacity seen in truckload. As of March, specialized freight employment still lagged behind pre-pandemic levels. In contrast, truckload employment initially built excess capacity, reaching a peak of 6% above pre-pandemic levels in 2023, but has since reversed this trend, eliminating all that surplus.

Chemicals Market Outlook: Potential Reductions in both Demand and Supply Softer demand: Despite the recent strength in chemical manufacturing, wholesale demand for chemicals has softened. Even with a 2% increase in the first quarter of 2025, wholesalers' chemical sales remain 2% below their level from a year ago and about 11% below their 2022 peak.

Capacity Downsizing: In anticipation of softer demand and facing the threat of tariffs, chemical carriers remain cautious about adding capacity. Following tariff announcements, trailer orders and sales declined across all types. These tariffs could increase trailer prices by 5% to 10%, according to ACT Research. The weak order numbers suggest a future reduction in trailer supply to adapt to softer demand, but also potentially risking service if the market recovers (e.g., through tariff agreements).

Short-term outlook May usually begins with softer markets nationwide, with the exception of Southern Florida, Texas, and Arizona, where summer produce creates some tightness. In other markets, spot rates typically range from 5% to 20% below their yearly averages.

As produce volumes increase, market tightness extends northward. This increase in spot rates between April and July, typically 5% to 8%, often indicates the freight market's trend for the rest of the year. An increase below 5% could indicate continued softness on a seasonally adjusted basis, while an increase exceeding 8% could indicate significant tightening.

The chemicals sector also benefits from the U.S.'s low reliance on Chinese chemical imports, enhancing its resilience to high tariffs. While chemicals make up a substantial portion of overall U.S. imports (18.8%), they constitute a much smaller share of imports from China (5.3%). Canada is the leading chemical exporter to the U.S., accounting for about 24% of total chemical imports, compared to China's 3.8%.