The Association of American Railroads is warning that Trump’s tariffs could “significantly reshape freight rail traffic across North America.”
The latest monthly update from the Association of American Railroads highlights the strong performance of intermodal container volumes in the US railroad system. “Intermodal traffic has remained a standout performer, increasing 10.3% year-over-year in January, extending an exceptional 17-month growth streak,” says the Association. “This strength reflects robust consumer spending and continued demand for containerised freight moving through U.S. supply chains.” According to AAR figures, January’s average weekly intermodal originations reached 265,943 units, the highest level recorded for January except in 2021.
The AAR does not put a figure on overall railroad capacity. There has been some concern over persistently high dwell times at on-dock rail facilities at the San Pedro ports highlighting a capacity constraint, but overall the US intermodal system has managed to handle growing volumes without major disruption. Of more pressing concern is the increasingly belligerent attitude adopted by the White House, over international trade. The AAR says that cross-border trade remains a crucial economic driver. The Association quantifies that at $204 billion in US-Mexico-Canada rail trade, from December 2023 to November 2024.
Crisscrossing borders
North and South border trade is roughly equal in value. According to the Bureau of Transportation Statistics, US-Canada rail trade (by value: US$106.4 billion) is driven by motor vehicles, crude oil and industrial materials. The slightly smaller US-Mexico rail trade ($97.6 billion) is led by agricultural commodities, and also motor vehicles. The automotive sector can involve multiple border crossings during the manufacturing process. “As tariff policies evolve, rail-dependent sectors like automotive, agriculture and energy will feel the effects first,” says the AAR in a cautionary note.
Any disruption to these flows could significantly reshape freight rail traffic across North America. “Rail-dependent sectors could see significant volume shifts if cross-border trade becomes more expensive or constrained,” says the AAR. “While the full impact remains uncertain, railroads must prepare for potential adjustments in demand as businesses react to policy changes.”
Future prospects mixed
The AAR believes that the broader economic signals are encouraging but mixed. They say that US GDP expanded 2.8% in 2024, supported largely by consumer spending. Spending on goods surged 6.6%, fuelling intermodal rail growth. The labour market remains stable, although the Association says hiring has slowed down. Railroad stocks remain a Wall Street staple – safe and steady with good capital growth. However, a contraction in the industry could change that favourable outlook.
Looking ahead, rail freight trends in early 2025 reflect broader economic indicators. The diversity of cargo sectors has allowed the sector to offset weaknesses in manufacturing and energy-related shipments. “While rail volumes have not fully rebounded, a potential turnaround in manufacturing, combined with stable trade flows, suggests cautious optimism,” says the AAR, noting the influence of wider economic policy. “With tariff policy, inflation and global trade conditions in flux, railroads must stay adaptable to shifting demand patterns. The industry enters 2025 with stability but lingering uncertainties, making strategic planning and flexibility key priorities moving forward.”